www.microcapreview.com Micro-Cap Review Magazine 3
In past issues of Micro-Cap Review, I
often wrote about the macro financial
environment and the US stock market
in the Editorial column. In this issue I have
decided to skip the macro dissertation to
focus on the state of micro-cap companies
in the United States and elsewhere around
the world. For the last several years, micro-
cap companies in the United States have
struggled to raise capital. Those that were
lucky enough to find capital often did so on
poor terms. The economic storms in recent
years have all but poisoned the pool of capi-
tal available for smaller companies.
While capital has become more scarce here,
funding sources have become more global,
requiring US investment bankers to reach
far beyond US borders. Finding companies
overseas that need financing used to be like
shooting ducks in a barrel. After all, hunt-
ing for bear was usually pretty good when
US companies carried a loaded checkbook.
The footprint of US investment bankers
stretched from China and other Asian coun-
tries to Africa, Israel, and South America.
Competition for underwriting companies
included investment bankers from London,
Frankfurt, Tokyo, Toronto, Paris, Sydney, and
Dubai, just to name a few places.
The competition created several nuances.
One such nuance was driven by the lack of US
GAAP preparedness in these countries of ori-
Editor’s Letter
e d I t o r I a l
This Publication is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Micro-Cap Review Magazine and its employees are not, nor do they claim to be registered investment advisors or broker/dealers. This magazine contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 relating to companies’ future operating results that are subject to certain risks that could cause results to differ materially from those projected. Readers are cautioned not to place undue reli-ance on these forward-looking statements. This publication undertakes no obligation to update these forward-looking statements. Micro-Cap Review Magazine, its owners, employees, their families and associates may have investments in companies featured within this publication and may elect to sell these investments or purchase additional investments in these companies at any time. However, the policy of our editorial staff is to avoid any pre-publication trading of featured stocks or sales until the release date of the magazine. In order to be in full compliance with the Securities Act of 1933, Section 17(b), where the publisher has received payment for advertisement/advertorial of a security, the amount and type of consideration will be fully disclosed. All information about the Company contained within an advertisement/advertorial has been furnished by the respective Company and the publisher has not made any independent verifi cations of such information and makes no implied or express warranties on the information provided. Readers should perform their own due diligence before investing in any securities mentioned. Investing in securities is speculative and carries a high degree of risk. All MicroCap Review Disclaimers apply http://www.microcapreview.com/disclaimer.php before investing view www.sec.gov/investors
gin. Chinese companies looking to go public in
the United States required catch-up account-
ing and SOX readiness, which inevitably cre-
ated a cottage industry both in China and the
United States. In this global issue of Micro-cap
Review, several articles describe the outcomes
of the hard work of global investment bankers
and their cadre of support people. How else
could over 500 Chinese companies be publicly
listed here in the United States?
The United States is the worldwide leader
in foreign company listings – a far cry from
the old days of simple ADRs that traded
on the Pink Sheets. More and more foreign
companies are viewing a public underwrit-
ing in the United States. American investors
have gobbled up billions of shares of Chinese
micro-cap companies, as well as shares of
other foreign micro-caps. The US financial
market has provided incredible liquidity for
early investors, public companies, and invest-
ment bankers. As long as global markets have
a demand for foreign public companies, and
liquidity in the US market remains strong,
there is no apparent reason for this trend to
end. Developing countries have a voracious
appetite for capital to fuel industries and
economies. Companies in these countries
have turned to global financial markets. They
look to the United States as the undisputed
king of capital, at least for now.
Wesley Ramjeet
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WRITERSJohnFaesselMatthewHaydenChetHebertBeauJohnsonJordanKimmelSheldon“Shelly”KraftJackLeslieLarryMayM.C.ElvisOxleyRonReuvenMarshallStermanHolmesStonerRaySuprenardBenTran
BUSINESS DEVELOPMENT
GRAPHIC [email protected]
Micro-Cap Review Magazine is published Quarterly, Spring, Summer, Fall, Winter POSTMASTER send address Changes to Micro-Cap Review Corporate Offi ces. © Copyright 2007 by Micro-Cap Review Inc. All Rights Reserved. Reproduction without permis-sion of the Publisher is prohibited. The publishers and editors are Not responsible for unsolicited mate-rials.Every effort has been made to assure that all In-formation presented in this issue is accurate And nei-ther Micro-Cap Review Magazine or any of its staff or authors is responsible for omissions or information that is inaccurate or misrepresented to the magazine.
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C O N T E N T S
WWW.MICROCAPREVIEW.COM
Q UA RT E R 1 2 0 1 0
Finance & Investments
6 A New Year’s Recommendation for the VC Community byMarshallSterman12 The Globalization of Consumerism byJordanKimmel15 China’s Micro-caps byHolmesStoner18 Ask Mr. Wallstreet-The New IPOs bySheldon“Shelly”Kraft20 Investing in China Micro-cap Stocks byMatthewHayden23 Funding Chinese Company Growth byBeauJohnson36 Junior Mining and Exploration Investment Strategies byRaySuprenard39 On the Market byDr.JohnFaessel46 The Other Side of the Story byRonReuven51 Ombudsman byJackLeslie53 Investing in Vietnam byBenTran
Legal, Tax & Accounting
50 Compliance Corner byChetHebert
Book Reviews
32 Start-up Nation Exceeds on the Test byDr.LarryMay
Human Resources
35 Managing Talent in a Downturn Economy-ATG byM.C.ElvisOxley
Profiled Companies
8 Bond Laboratories27 T3 Motion31 VCorp Services43 Healthy Coffee International47 Rogers Oil & Gas
6 Micro-Cap Review Magazine www.microcapreview.com
Not to worry. The mavens in Silicon Valley
and their counterparts on Route 128 (actu-
ally I-95) are simply advising their jockeys
to batten down the hatches and to stay out
in the cold. As long as VCs stop giving jock-
eys advice, it’s probably a good trade-off.
After all, VCs never thought positive cash
flow was something they had to worry
about. The formula was fairly simple. They
first made sure that there was a young and
passionate “team” that could articulate a
business plan to give a picture of the future
that looked like a hockey stick with a Viagra
overdose. Then they had the team create a
great Web site and extolled the virtues of
the venture while roping in their buddies
for B, C, and D rounds. Obviously their
buddies would return the favor. As long
as “one hand washed the other,” the daisy
chain kept everyone’s reputation and bonus
in tact. Unfortunately VCs do not walk on water,
which of course is what they would have
people believe. The 2 to 3 percent annual tar-
iff, plus the 20 percent slice of profits without
claw backs, was proof of that. But without a
Thundering Herd, legions of fawning ana-
lysts, mindless, non-discriminating mutual
funds sporting a record of sub-standard
returns (and I mean losses), the jury-rigged
money machine of the past is caput. The
point is that things have changed, and the VC
community needs a face-lift, a tummy tuck,
and some blood letting.
General Doriot must be rolling over in his grave as he listens to venture capi-
talists (VC) cry over the lack of IPOs. After all, if Bernie can take down his
billions with a meager 10 to 12 percent, why can’t the VC’s promise of ten baggers
with capital gains treatment reel in the multitudes? A closed door at the exit sign is
cutting off the flow of fresh capital to redo the Aspen condo.
A New Year’s Recommendation for the VC Community
Marshall s. sterMan
F I n a n C e
www.microcapreview.com Micro-Cap Review Magazine 7
The first step in the make-over is to remind
VCs of why they went into the business
in the first place. Let’s hope (and assume)
that it was because they believed that they
could manage money of investors who were
capable and willing to assume more risk in
a quest for mega returns. Investors didn’t
want to gamble in Vegas, but they didn’t
mind a day at the races; the VC wasn’t roll-
ing the dice but was “handicapping.” Venture
capitalists examined many factors, sat out a
number of races, and considered the odds,
having the benefit of knowing the jockey,
the competition, the breeding line, past per-
formance, track conditions, and a host of
other data that equated to charting, price-
to-earnings ratios, industry differentiators,
historic and current financials, etc. They also
accepted the fact that “in the beginning, God
created the business plan.” If only they could
embrace and support the plan, its precepts,
and beliefs, they could create value (per-
ceived or otherwise) that would produce an
“exit” worthy of the risk when measuring the
overall return of the portfolio. The VC’s role is to vet the many and anoint
the few. It’s a beauty pageant in which the
bodice is secondary to the brain. Gentlemen
prefer greens to blondes. Anything that reeks
of bio/pharma/nano or is related to sun/
wind/soil, or has at least six scientific board
members with ties to Harvard, makes the
cut. Until recently all that the VC had to do
was to point out the enormous international
markets, margins someone could drive a
truck through, and the protection of intel-
lectual property or “magic-sauce.” It helped
to have Wilson, Sonsini, and the oversight of
Coopers (oops, I meant Deloitte). Next was
to have the VC say, “Abracadabra,” toss back
a few coladas, then turn the team over to
Goldman Sachs, and wait for friends to call
to get on the friends-and-families list. That was yesterday, pre-unmasking
of Greenspan, Paulson, Rubin, Kravis,
Blackstone, ad infinitum, not to mention
a major portion of what was Wall Street.
Forget McArthur–there will be no return,
at least until the deepest scars in anyone’s
memory can be erased. If VCs want to stay
in the game, they really have to go to work.
Those with dreams of sitting in the front
room of San Pietro need to do more than
just field a good team. They also need to play
both ways and be able to execute options
that they would farm out in the past, but will
be personally responsible for going forward. Not unlike Goldman or Morgan, the VCs
that want to survive and fulfill their destiny
must morph into the closest equivalent of a
bank. They won’t have access to the “win-
dow” or be able to insure their depositors,
but can structure for a different environ-
ment and truly play on both sides of the
line of scrimmage. They need to adopt the
model of the merchant banker. They need
to keep in mind that they are dealing with
money that belongs to someone else–their
families, friends, and the king. Venture capi-
talist also need to be sure that they are not
on the opposite side of their borrower/cli-
ent. For example, they should not engage in
last-minute changing of terms by sending in
attorneys who then rape and pillage under
the guise of protecting the client. I am not
sure when the rules of engagement changed.
The environment used to be kinder, gentler
–and just as profitable–until people started
to pay more than 50 cents for a cup of coffee. I’m not suggesting the newly minted mer-
chant bankers (aka VC) change their selec-
tions/choices/beauty contest winners, but
they need to be able to orchestrate multiple
exit opportunities without the help of a sys-
tem that we know now has been broken. Their
tools are already in place. They just need to
use them so that their investors do not have to
count on the market to offer liquidity/return
until public or private take-outs are engi-
neered. Positive cash flow is always acceptable
if everyone can come to the trough. If that’s
not possible, then the public markets become
an option only if the VC can structure, price,
and “market” appropriately. It’s a subject for
another day but if VCs can put themselves in
the buyer’s chair, there are enough bells and
whistles that they can use to satisfy their latent
desire for an IPO that sizzles. It’s not an “exit”
but sets up the first trickle. Here’s to a New Year which aligns the
interests of the entrepreneur, investor, and
the mid-wife in a changed environment that
rewards the blue collar rather than the sable
cape.
About the Author
Marshall S. Sterman has had a distinguished career
in corporate finance with 50 years of experience in
the industry. He held positions at Sterman & Gowell
(investment banking and securities brokerage),
Croesus Capital (work out consulting for institu-
tional investors), M. S. Sterman & Associates (mer-
chant banking), Pilgrim Financial Services (invest-
ment in distressed securities), and The BankHouse
(merchant bank). Since 1986 Mr. Sterman has
worked at the Mayflower Group, a Boston-based
merchant bank to originate, mentor, and finance
both start-up and early stage ventures. His entrepre-
neurial activity includes helping to fund and manage
numerous operations, including the Standish Care
Company, the first assisted living company to go
public; KTI, a municipal waste company (merged
with Casella Waste); Rebound Programs, a provider
of juvenile corrections facilities; and hotel and real
estate development ventures. He currently serves
on the board of directors of numerous companies
and is actively involved in many business organi-
zations. Mr. Sterman received a BA degree from
Brandeis University in 1953 and an MBA degree
from Harvard University in 1955. After graduating
from Harvard, he served in the US Navy as a lieuten-
ant from 1955-1958. n
It’s a beauty pageant in which the bodice is secondary to the brain. Gentlemen prefer greens to blondes. Anything that reeks of bio/pharma/nano or is related to sun/wind/soil, or has at least six scientific board members with ties to Harvard, makes the cut.
PROFILED COMPANIES
8 Micro-Cap Review Magazine www.microcapreview.com
Every so many years the beverage industry introduces a major
new category. When this happens, a multi-billion dollar
drink segment emerges. Seemingly overnight obscure manu-
facturers become giant household names that join the ranks of Coca-
Cola and Pepsi. In the early 1980s wine coolers moved from beach
parties to grocery shelves. In the late 1990s the energy drinks made
big waves with mega-brands like Red Bull, Monster, and RockStar.
Over the last decade, energy drinks have lit up the packaged beverage
industry, churning out double-digit sales growth and strong profit
margins. Moving into 2010 and the next decade, the new category
looks to be hangover prevention and the next power-brand appears
to be Resurrection™ AntiHangover from Bond Laboratories, Inc.
Bond Laboratories, Inc. (OTCBB: BNLB) is the first company
to introduce a hangover prevention drink. Through its subsidiary,
Fusion Premium Beverages, the company launched Resurrection™
AntiHangover in September 2009. An 8.4 ounce drink, the product
is designed to be a “pretox” drink enjoyed either before consuming
alcohol, or as a mixer with the first drink of the night. The lightly
carbonated, mild fruit flavor mixes very nicely with alcoholic drinks,
including vodka, rum, tequila, and gin. The company promises no
hangover for the following 24 hours, the average amount of time it
takes the body to process alcohol. The company backs up that prom-
ise with a money back guarantee, no questions asked.
Is there enough consumer interest in hangover prevention? A
recent study reported that hangovers affect 74 million people in the
United States and cost U.S. workplaces $148 billion in lost productiv-
ity. Bond’s pitch is that everyone who has a drink should begin with a
can of Resurrection™ either before they begin drinking or as a mixer
with their first drink of the night. Why risk a hangover?
With the introduction of Resurrection™, an all natural hangover
prevention drink, Bond Laboratories believes it can dominate this
market and expand rapidly across the United States.
Bond Laboratories is a premier marketer of healthy food and
beverage products for health conscious consumers. The company
produces and markets its products through two operating divisions
– Fusion Premium Beverages and NDS Nutritional Products. Fusion
distributes a line of fortified beverages to support and promote an
active lifestyle. NDS manufactures and distributes a full line of
nutritional supplements to support healthy living through a variety
of retail channels, including GNC stores across the country. Bond
Laboratories has assembled a seasoned team of highly successful
sales and marketing executives with experience at many well known
beverage brands, including Coca Cola, Monster, RockStar and Dr.
Pepper/Snapple. Bond Laboratories is headed by CEO John Wilson,
who spent over 17 years at Coca-Cola and Coca-Cola Enterprises.
What is the value of being first to market with an innovative new
product in the beverage industry? According to CEO John Wilson,
“a new product can capture 55 to 65 percent of total market share
simply by leading the way as a pioneer in a category.”
Whenever new markets emerge, the big winners are invariably
those who are first to launch products with strong distribution and
marketing. Consider the energy drink market; Red Bull was intro-
duced into the United States in 1997.
Today it remains the leader with nearly
50 percent share of a market estimat-
ed at $7 billion. Monster, launched in
1999, is on track to generate over $1.2
billion in 2009. Even RockStar, which
arrived a few years after Monster, has
captured nearly 15 percent of the US
market. That’s not shabby for brands
that did not exist a decade ago.
the birth of the
resurrection™ the
AntihAngover Drink
Bond Laboratories believes that it is in
a similar position today where Red Bull
was back in 1997 when the company
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brought the first energy drink to the U.S market. Bond Laboratories
has identified an untapped market segment, has formulated a prod-
uct to meet demand, and has assembled a management team with
deep industry relationships to create a strong distribution system.
enter the Perfect storm of 2008
After working on a hangover relief product for over a year, the
development team at Fusion Premium Beverages reversed its focus
from post-hangover relief to pre-hangover prevention. Ethanol (the
primary ingredient in alcoholic beverages) has a dehydrating effect
by increasing perspiration and urine production. The effects of dehy-
dration include headaches, dry mouth, and lethargy. Dehydration
also causes fluids in the brain to be less plentiful. In simple terms,
a hangover is the result of dehydration, brought on by the liver’s
attempt to overpower alcohol toxins. The bottom line is that once
the liver starts to attack the alcohol toxins, dehydration is inevitable
as is a hangover.
stAge one
In 2008, the founder of Bond Laboratories was introduced to a group
that had adapted Chinese herbs to essentially alter the way the liver
attacks ethanol. The result of using these herbs was the drastic reduc-
tion of dehydration and hangover symptoms. For several years this
group had been selling the herbal product as a pill in Canada, but
could not make the leap from capsule to pre-mixed drink, where the
real market opportunity lay. By the end of 2008, Bond Laboratories
acquired the rights to the product and successfully tweaked the for-
mula to produce a ready-to-drink version in an 8.4 ounce can, giving
birth to the Resurrection™ anti-hangover drink.
stAge two
In October of 2008, Monster Energy Drink announced it was moving
from the Anheuser Busch (A/B) distribution network to the Coca-
Cola network, eliminating one of the most profitable products on the
A/B delivery trucks. (In 2004, Monster Energy Drink entered into a
distribution agreement with Anheuser Busch, taking sales from $400
million to $1 billion by 2008. Profit margins were very strong at
$8 plus per case.)Monster viewed the Coca-Cola system as a better
fit for expansion outside of the country. Within 90 days, another
leader in the energy drink category, RockStar, entered into an exclu-
sive distribution agreement with Pepsi, essentially eliminating two of
the three top selling energy drinks from the beer distribution system.
stAge three
Then in November 2008, just as Resurrection™ was emerging from
the lab, Coca-Cola Enterprises (CCE) announced their latest round
of layoffs. In the stroke of a pen, Coca-Cola Enterprises sent a num-
ber of veterans packing. Many of these managers had 15 to 20 years
experience, including those with strategic relationships with some
the largest retailers in the country. The result was a market flooded
with highly-experienced beverage industry talent. The lay-offs gave
Bond Laboratories an opportunity to pick up former senior execu-
tives from leading beverage companies, including Coca-Cola, Pepsi,
Dr. Pepper, Snapple, Monster, and Rock Star.
By the beginning of 2009, Bond Laboratories had a potential
blockbuster product in Resurrection™. The market had major
beer distributors anxious to fill a major profit hole on their trucks;
and there was incredible management talent from the beverage
industry looking for work. It was The Perfect Storm!
Bond Laboratories believes the hangover prevention beverage
category is going to be enormous. The company looks to be correct.
Unlike energy drinks where the majority of consumers consist of
males between the ages of 16 and 26, the hangover prevention prod-
uct is gender neutral and appeals to a far broader age range. In fact,
the potential market is defined pretty much by the number of people
who drink. And the number of people who drink is huge.
The bottom line is that the alcoholic beverage business opens the
door to a potentially massive market opportunity for Resurrection™.
At a suggested retail price of $2.49 per can, Bond has the opportunity to
be the leader in a retail market estimated to be worth $17.8 billion in the
United States, almost four times larger than the energy drink market.
While the demand of energy drinks seems to be receding, trends
for the next several years appear to be focused on functional bever-
ages that do more than just quench your thirst. “The intrigue is in
the fringe part of the beverage businesses, which seems to be grow-
ing, even during the recession,” noted Gerry Khermouch, editor of
Beverage Business Insights.
New, niche drinks that meet specific demands of diverse customers
and carry healthy margins will get the attention of both distributors
PROFILED COMPANIES
www.microcapreview.com Micro-Cap Review Magazine 11
and retailers. Margin trends in the beverage industry have declined
for years. For example, profit on a case of beer sold by a distributor
to a retailer is down to about $2 per case. Water was very profitable
for years, but the margins on it have also dropped to $2 per case or
less. Looking forward, one of the most profitable products on beer
trucks will be functional beverages, like Resurrection™ with margins
that exceed $9/case.
Distributors and the retailers are further attracted to Resurrection™
because it is brand neutral and incremental. This means the product
appeals to any and all consumers of alcohol regardless of brand/type
of alcohol purchased. Resurrection™ can be added on to beer multi-
packs, wine, and liquor sales.
how big is the tArget mArket?
According to a study by the National Institute on Alcohol Abuse
and Alcoholism (NIAAA), 138 million US adults have at least one
drink per week. With that said, let’s consider the math: 138 mil-
lion consumers x 52, (1 drink per week) = 7,176,000,000 purchase
opportunities per year.
consumer reAction?
The company conducted six months of research with consumers of
all ages. (“Let me understand this…you have a great tasting drink
that can mix with almost any alcohol and if I make this my first drink
of the night, you promise I won’t get a hangover for 24 hours? Do I
still get the same buzz? ...Yes?”). The company had no problem find-
ing volunteers to test the product.
results to DAte?
Resurrection™ gained access to over 20,000 accounts within 90 days
after launch.
why bonD lAborAtories?
Bond Laboratories has a bright future. While the biggest story is
Resurrection™, investors should also be aware that the company is
much more than a single product company. Bond Laboratories man-
ufactures and markets a line of nutritional products through its NDS
Nutritional Products division. For the quarter ending September
30, 2009, Bond Laboratories reported revenue of $2.2 million, up
from $501,000 in the same period a year before. These results were
obtained before the launch of Resurrection™.
In some ways Bond Laboratories is looking a bit like Hansen
Natural Corporation (parent company of Monster Energy Drink)
over a decade ago. At the initial launch of Monster, the split-adjusted
price was $0.50 per share. The stock now trades at nearly $40 per
share after hitting a high of around $70 per share in 2007. While not
suggesting that the growth of Hansen is in any way indicative of the
potential for Bond Laboratories, there are a few observations worth
noting. Hansen was an early entrant into the energy drink market.
Bond Laboratories believes that it is currently in the same position
for hangover prevention drinks. Currently, Bond Laboratories is
trading at approximately 2 1/2 times its pre-launch price. Where
Bond goes from here is unknown. But one thing is certain. Bond
Laboratories is a company worth watching in 2010.
For more information, readers should visit http://bond-labs.com
or contact Warren Rothouse or Bruce Weinstein Surety Financial
Group, LLC at (410) 833-0078. Rumor has it that if readers ask, the
company will send them a free sample of Resurrection to try. n
Disclaimer: This corporate profile is based upon information provided by the issuer
or company representative. The information is not intended to be, and shall not con-
stitute, an offer to sell or solicitation of any offer to buy any securities. It is intended
for information purposes only, and to increase awareness of the company profiled.
Safe Harbor Statement: The statements in this advertorial or profile relating to
future products, partnerships, technology, and positive direction are forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Some or all of the aspects anticipated by these forward looking statements may
not, in fact, occur. Factors that could cause or contribute to such differences include
but are not limited to contractual difficulties, demand for the Issuer’s common stock,
and the company’s ability to obtain future financing. Micro-cap Review Magazine
may have received payment to publish and print this advertorial or corporate profile.
Micro-cap Review Magazine disclaimers apply and may be reviewed at www.micro-
capreview.com/disclaimer.php. Before investing in any security, you are strongly
advised to review all public filings of the issuer of such security, which can be found
at www.sec.gov, as well as warnings published by the SEC at www.sec.gov/investors
and to consult with your professionals.
12 Micro-Cap Review Magazine www.microcapreview.com12 Micro-Cap Review Magazine www.microcapreview.com
As global trade continues to expand and
multinational corporations spread around
the globe, we will continue to see an ever-
expanding need for an improved infrastruc-
ture. The projects that will help to build
out the infrastructure, as well as the work
that will be needed to maintain it, require a
tremendous amount of financing and man-
power. The globalization of consumerism is
creating the demand and is the force behind
the next big growth cycle.
As we wonder where new jobs will come
from, just consider what it takes to build a
single bridge-the architects, engineers, and
the laborers. Here in America, many of our
existing bridges and roads are behind sched-
ule in terms of maintenance and repairs. In
fact, our population has grown dramatically
over the years and our entire infrastructure
can use updating. All these jobs by definition
are domestic- you cannot outsource these
jobs overseas. Compare our infrastructure
to China. The U.S. highway system has more
than 27,000 miles of highway that was built
over several decades. Just within the last
several years, China has built almost 25,000
miles of highway and has announced that it
is planning on expanding its highway system
to more than 50,000 miles by 2020, while
adding 97 airports and also almost dou-
bling its shipping container traffic. China
is employing their workforce to help bring
up their standard of living while also creat-
ing a population that can consume. Hello,
Washington!
When we think of the transportation
infrastructure, Americans tend to think
domestically, as usual. While our last genera-
the globalization of consumerism
F I n a n C e
Demand creates new “magnets”
The world is getting smaller. We hear this all the
time. The reality is not that the world getting
smaller- travelling around the world is getting easier.
by Jordan KIMMel
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14 Micro-Cap Review Magazine www.microcapreview.com
tion was amazed by the construction of the
Golden Gate Bridge in San Francisco and
the Verrazano-Narrows Bridge in New York
City, we just saw the completion of the mul-
tibillion-dollar Chunnel connecting separate
countries in Europe. While some people will
continue to dwell on the last recession, we
should realize that the globalization of con-
sumerism will lead to further projects with a
scope we can’t even imagine.
The global infrastructure build-out is tak-
ing place on every continent, but there is
a reason everybody thinks about China as
much as they do. While the tremendous
infrastructure stimulus package initiated
domestically was enough to awe any central
banker, it is dwarfed by the spending tak-
ing place in China. There are no less than
a dozen massive new bridges being built
throughout China, with dozens more on
the drawing board. We think Texans think
big? The construction of the Three Gorges
Dam in China required more than 350,000
tons of steel, and it will have the capacity to
produce the power equivalent of 15 nuclear
power plants.
We also need to think about the new ener-
gy grids and massive communication proj-
ects required to keep up with ever-increasing
global trade. And while I urge investors to
think globally, we cannot even stop there. I
recently read about “pods” or channels being
thought out that will greatly enhance space
travel. Japan has announced and already
started construction of a new power plant
that will orbit in space and beam energy
back to Earth. I am not talking about science
fiction here; I am talking about a $20 billion
project already initiated that is putting engi-
neers, manufacturers and suppliers to work
today. Our domestic space program is just
kicking back into gear and our exploration
of our deep oceans is just beginning.
Currently, 30% of our work force is
employed in industries that did not even
exist 30 years ago. This amazing fact may
be repeated again over the next 30 years.
Who knows what to expect in the field
of transportation that will lead to even
more of a global community. Some cur-
rent ideas range from flying cars, jet-pack
lanes, underwater subways, hover boards
and teleportation. In fact, believe it or not
in 2009 scientists announced the first actual
teleportation event- beam me up, Scotty! We
can only imagine the new job opportunities
and the amount of new investments required
to pull off future scientific ventures. Capital-
intensive projects and industries are never
funded with cash. We will ultimately see
multibillion-dollar financing put together in
the capital markets generating multimillion-
dollar fees to the financial firms putting
together the deals. Don’t for a minute think
Wall Street is dead- it is just spreading out
around the world.
We do not need to think of all these
magnificent large-scale technology advance-
ments to be excited about the opportunities
to invest in the infrastructure sector of today.
With the advent of the Internet, consum-
ers and businesses from around the world
are changing the landscape of purchasing,
distribution, and international shipping. I
believe the next growth cycle will lead to an
even higher level of global trade and infra-
structure needs.
In my new book, The Magnet Method of
Investing (Wiley, 2009), I showed the list of
companies that ranked out the highest on
my model as we went to print. Using my
Magnet® Stock Selection Process, I use a
“bottoms up” approach to identify the indi-
vidual companies within each sector that
have the best combination of value, growth
and momentum. The list was not intended
as a buy list- just a list of the top ranked
companies according to the Magnet model.
It was interesting to see how many of the top
ranked companies are based overseas.
I have no doubt there will be great oppor-
tunities presented in the various sectors that
benefit from the ever-expanding infrastruc-
ture being built around the world. Some of
the new market leaders will come from all
corners of the world. As always, many of
the leaders of the next bull markets are now
small companies that many investors have
not heard about yet. That is why investing
is so interesting- and potentially rewarding.
About the Author
Jordan Kimmel is the Market Strategist at National
Securities Corp., and as a Financial Planner he man-
ages customer accounts at their affiliate National
Asset Management. He is the author of the recently
released book, The Magnet Method of Investing, and
can he be found and contacted through his website
www.magnetinvesting.com. n
currently, 30% of our work force is employed
in industries that did not even exist 30 years
ago. this amazing fact may be repeated again
over the next 30 years.
why look At micro-cAPs?
Investors buy micro-cap stocks mainly to
profit from inefficiencies in the stock mar-
ket. In fact, information inefficiency is high-
er among small-cap stocks than blue chip
stocks. Investors who can exploit such inef-
ficiency can profit greatly. From my experi-
ence, few research analysts write reports
on small-cap companies. Thus, much infor-
mation remains undiscovered, and will
therefore take longer for it to be reflected in
the share price. Investing in small-cap stocks
in China is especially exciting, because the
universe of micro-cap stocks is huge and is
getting bigger.
Based on history, we can understand why
small-cap companies are driving China’s
economy. China started converting from
a planned economy into a market economy
only recently. In 1982 the then party leader,
Deng Xiaoping, introduced the Open Door
Policy. The reforms initiated under this poli-
cy helped launch China into a new era.
As a result of the market reforms, small,
private enterprises have played a bigger role
in China’s economy since the 1980s. The
small-caps in China are not only more in
number, but also better in quality, because
they represent the new economy. Further,
they are mostly run by entrepreneurs rather
than civil servants.
how to invest in
smAll-cAPs?
There are thousands of small-cap stocks in
China, so how do we exploit the information
inefficiency faster than others? And where
should we start looking for such inefficiency?
An example of themes is outsourcing.
During the 1990s when many global indus-
F I n a n C e
China’s Micro-Caps
A Huge Investment Opportunity
by holMes stoner
www.microcapreview.com Micro-Cap Review Magazine 15
tries outsourced production of goods to
China, companies involved in this trend ben-
efited greatly. Instead of visiting companies
across all sectors and industries, or screen-
ing companies with all kinds of numeric
parameters, we use themes to point us to the
relevant segments of the economy.
Devils are always in the details. Identifying
the themes sounds very simple, and most
people who read the newspaper can tell what
themes exist in the world. The details of each
theme, however, are difficult to analyze and
capture. Let’s go back to the earlier example
of the outsourcing theme. The outsourcing
trend started off with textiles and apparels,
and then moved to household electric goods,
such as refrigerators and washing machines.
Outsourcing later moved to computers and
laptops, then mobile phones, then contain-
ers, then ships, then machines, then car
parts, then automobiles, then medical equip-
ments….then what next? Investors can make
money in manufacturing companies only
at the beginning of the outsourcing trend
for specific products. Late investors will see
competition intensified and profit margins
squeezed.
whAt Are the current
themes?
Education
Within China’s emerging middle class, we
see the demand for education services grow-
ing rapidly. Chinese parents are willing to
spend a high percentage of their income to
educate their only child. They are also will-
ing to spend a lot of money to upgrade their
own professional skills to face the increas-
ingly demanding and fast changing job mar-
ket in China. Most of the listed companies in
education are small and serve customers in a
few niche markets.
Environment protection
The biggest gain that China got from
hosting the Olympics in 2008 was rais-
ing the environmental consciousness among
Chinese people. A strong public awareness
of environmental issues will help the gov-
ernment enforce policies more effectively.
Other areas of particular interest and great
upside growth potential are:
• Information Technology
• Discretionary Consumer Products
• Industrials
• Materials
• Health Care
• Utilities
• Telecommunication Services
• Real Estate
• Consumer Staples
• Energy
whAt is the risk of
smAll-cAP investing?
Investors believe company-specific risk to be
the greatest risk when investing in small-cap
stocks. This explains why small-cap stocks
usually under-perform when a financial cri-
sis occurs. Because of corporate governance
issues, investing in both large-cap and small-
cap stocks in China is risky. The only real
difference is that when there are failures,
large-caps will likely not end up bankrupt
or get delisted. Most of the China large-cap
companies have the state as a major share-
holder. In the worst case, the government
will bail out the company .
is it the right time to
invest in smAll-cAPs now?
The essence of small-cap investing is in the
stock picking. Average index performance
is meaningless, because the index covers
too many stocks. Investors should always
keep a certain percentage of their assets in
small-caps, especially in China small-caps.
Doing so is a good investment decision if
only for the sole reason mentioned above
- the private sector is growing rapidly and
is taking a bigger part of China’s economy.
Furthermore, I can see a secular trend which
will benefit China as a whole, and in par-
ticular for small-caps. China’s development
over the last decade was made possible by
huge inflows of foreign capital, both direct
investments in industries and capital market
investments.
In the next decade, I foresee China’s
growth to be driven primarily by an influx
of human capital. Immigration is China’s
emerging mega-theme and will serve as the
reason for the country’s future develop-
ment. An important source of immigrants
will be overseas Chinese. Overseas return-
ees are highly educated and professionally
trained. Many have post-graduate degrees
from prestigious US universities. Returnees
will see better career prospects in China.
More importantly, going forward China will
attract not only ethnic Chinese, but also for-
eigners of all nationalities.
The influx of foreign human capital will
mark the next stage of China’s development.
The progress will be measured not only in
quantity, such as GDP growth or kilome-
ters of highways and railways, but also by
degree of sophistication. Small-cap, private
enterprises are among the first to attract
high-quality human capital because of their
more flexible compensation schemes. With
a simple corporate structure, smaller com-
panies give younger employees a chance to
make an immediate impact and move up in
the company.
About the Author
Holmes H. Stoner Jr.
Chairman
American International Chamber of Commerce
Pacific Rim Business Council/AIBC
American International Business Council (AIBC)
Pacific Rim Business Council (PRBC)
No 977 Kangding Road
Shanghai 200042
Tel: +86 21 2211 6184 (General);
+86 21 5158 6105 (Direct)
Fax: +86 21 2211 6197
Mobile: +86 15000851121
Website: www.pacrimdirectory.com
www.americaninternationalbusinesscouncil.com n
16 Micro-Cap Review Magazine www.microcapreview.com
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18 Micro-Cap Review Magazine www.microcapreview.com
The stock market in recent years can be
compared to the California wildfires. In the
last few years, fires in California have rav-
aged hundreds of thousands of acres of for-
ests and land, not to mentioned thousands
of homes and properties. The destruction
left behind smoking timbers and leveled
ground. Similarly the stock market has been
a financial hell to investors during the last
decade. Since 2000 the dotcom bust and
the ensuing financial debacles have turned
hundreds of companies into mere shells and
have left many investors broke. Only the
shells remained from those defunct com-
panies. Many such companies did not have
any comeback hopes, last minute manage-
ment saves, or white knights. As with the
California fires that burned away years of
un-cleared brush and trees, the stock market
crash incinerated the market and caused a
meltdown of micro-cap stocks.
Over time the ground will grow again and
new tundra will emerge. Incredibly the same
has started to happen for the leftover public
shells. Following the dotcom bust, these
shells blanketed the landscape like a scene
from the war in Iraq where blown up tanks
were strewn all over the desert following
Desert Storm.
Each of these blown up tanks can be
thought of as an empty public company
shell. In the case of a blown out public shell,
the company may have run out of money,
may have fallen to zero value due to compli-
ance issues, or may have had lousy manage-
ment. Many of the companies went bank-
rupt. They ceased filing documents with
the Securities and Exchange Commission or
stopped reporting financials altogether.
In a market where stocks were trading
with volume and moving higher, these pub-
lic company shell carcasses could lay there
abandoned. So long as there was a healthy
IPO market, private companies could start
fresh by going public through an underwrit-
ing, instead of dealing with the baggage or
cleanup costs by using a public company
shell. Thus, many of the public shells laid
there lifeless. As they laid there, sharehold-
ers of the public company shells disap-
peared. Worked, however, continued on the
shells, and clean-up costs started to accrue.
Keeping track of transfer agents, stock cer-
tificates, and other records became more
difficult. Many of these abandoned shells
fell to the lawyers and accountants. After all,
many of them had done work for companies
and were yet to be paid in full. Can’t say I
blame them for grabbing the shell. At least
it had some value to them. Little did people
realize just how much value the shells would
turn into.
Raising capital is a science not an art.
Once the entity has been created, the compa-
ny only needs to answer a few questions. Can
the shares be sold at the expected valuation
to investors? And do investors have an exit
strategy? Exit strategy means being able to
sell stock in the public market at a later date.
Of course, the timing and cost are the key to
decide which method is used for the equity
raise. How long will it take to get through the
Securities and Exchange Commission review
process? How much money is anticipated
for the whole process? These are questions
that need to be answered. I suspect that
large-cap stock underwritings were the last
equity deals completed, because the big boys
F I n a n C e
A S K M R . W A L L S T R E E T
The New IPOs
After writing the article, “Where Have All the IPOs Gone,” I
realized how much the stock market has changed over the
years. My experience has been in the world of micro-cap stocks,
so I will focus on the area that I know best.
by sheldon “shelly” KraFt
www.microcapreview.com Micro-Cap Review Magazine 19
always had money. The first deals to collapse
in funding droughts are those dealing with
micro-cap companies. Smaller boutique
underwriters that once handled such deals
simply don’t exist anymore.
Back in the heydays, investment banking
fees and professional costs rose five-fold
in some cases and issuers had no guaran-
tee of ever being funded. But the market
has changed dramatically. The capital rais-
ing industry has been devastated, following
the wake of the capital shrinkage affecting
middle-market and small-cap underwriters.
The credit crunch has forced companies to
raise money by new ways and new sourc-
es. Raising capital for micro-cap emerging
growth companies remains extremely tough
today. However, credit must be given where
credit is due. The entrepreneurial spirit and
the need to raise capital at reasonable costs
have fostered the incredible and brilliant
resurrection of all those once-abandoned
public shells. These resurrected shells have
become today’s new IPO’s.
During the dotcom bust, many public
shells fell to the Pink Sheets, which was the
only place left to fall and remain a pub-
lic company. Investors belie the regret of
their investments into these risky companies.
Many investors not only lost money, they
were not allowed to take a tax deduction.
An investor could recognize a capital loss
for tax purposes, only if they could sell the
stock to lock in the loss. The IRS required
proof of the sell for the loss to stand up,
which meant producing a buy to establish
a cost basis and a sell ticket. Investors had
to prove the loss against a 1099 which was
sent by the brokerage house to the IRS. In
many cases, investors did not to sell the stock
because market makers were not around
when the market imploded. Many investors
were not able to establish a sell transaction,
and therefore did not prove the loss. Millions
upon millions of shares were deemed value-
less and as such these worthless certificates
became the proverbial wallpaper for the new
bathroom walls.
Regardless of the many issues, the public
shells were abundant, cheap to buy, and
relatively easy to clean up. Once purchased
and cleaned up, they were the perfect way to
take a private company public by means of a
reverse merger into the public shell. The two
key elements of timing and cost were desir-
able and gave “instantaneous gratification”
to all investors. I would love to write a book
entitled, Instantaneous Gratification-–wel-
come to the world of Wall Street!
The use of public shells to take a company
public started out as a well-kept secret by
SEC law firms. These firms were engaged in
the practice of filing S1, SB2, and IPO docu-
ments with the SEC. Taken together, each
component of the transaction involving the
accounting firm, law firm, investor relations
firm, and the market maker helped give birth
to the cottage industry of going public via a
reverse merger into a public company shell.
This cottage industry is now the IPO market.
It is truly difficult to shoot a hole in the
model. Once the public company shell is
identified, which can be very difficult, it is
very methodical to reverse merge the private
company into the shell. The process first
involves issuing a reverse stock split of the
shares in the old company shell. This is done
to minimize the holdings of the old share-
holders from the previous public company
and to recapitalize the company. The next
step in the process is to change the name
and stock symbol and issue new shares to
the new shareholders to capitalize the new
company (newco). In fact, having the old
shareholders around can be useful to newco
to meet certain trading requirements and
limitations.
Raising money for a private company in
today’s market environment is very difficult.
Placing the same private company into a
public shell provides greater assurance that
the company will raise money (although
there are never any assurances or guarantees
except death and losses). Once public, the
issuing company has many choices from
which to choose to raise money. Investors
may ask why is this so? It is because the
public company has a built-in exit strategy.
The shares in a public company can be sold
at some point in the future in the market. So
the end in this case justifies the means.
The new IPO is the reverse merger.
An investor’s portfolio of bust out stocks
may have some value after all. Investors
should check to see that they still have the
certificate(s) of that once promising dotcom
company that they lost thousands of dollars
on. Investors should do some homework and
find out whether the shell is now a Chinese
iron manufacturer or the largest real estate
company in Beijing or a company trading
at $40 a share. Even a few shares could be
worth some bucks. Investors may want to
start peeling the certificates off of their bath-
room walls or basement, because there may
be gold in them paper.
Most likely investors who owned stock
certificates in the defunct company were left
in the dark about the reverse merger deal.
The deal makers probably never contacted
these investors, because the old shareholders
were considered a sleeping dog and should
not be disturbed. Investors, however, should
not be lazy and try to do some work to find
out what happened to the shell of their old
company. The information about the com-
pany shell is available either through FINRA,
Depository Trust Company, NASDAQ, the
transfer agent or the Pink Sheets. A stock
broker or financial advisor will be of little
help on this. Maybe the title of this article
should have been “Finding the Lost Value
in Old Shells.” Readers will get the idea.
Hopefully, I increased their understanding
of the new IPO market in this two part series
written for Micro-Cap Review magazine. n
Over time the ground will grow again and new tundra will emerge. Incredibly the same has started to happen for the leftover public shells.
20 Micro-Cap Review Magazine www.microcapreview.com
The country will continue to enjoy strong
growth in 2010 due to several macroeco-
nomic drivers. First, investment growth,
although expected to be lower than that
in 2009, should still be robust, given the
long-term nature of infrastructure projects
and the revival of the real estate market.
Second, domestic consumption will likely
grow at its current strong level, supported
by continued government incentives. Third,
export demand should slowly recover with
an improving world economy. Fourth,
China will likely keep its currency exchange
rate stable with the US dollar to maintain
exports. Fifth, fiscal policy will likely remain
expansionary with more focus on increas-
ing consumption and infrastructure spend-
ing. Monetary policy, however, will likely
be more restrained, as China tries to rein
in excess liquidity to prevent an asset price
bubble. Lastly, China should see a mild infla-
tion in 2010 due to excess capacity in many
industries. I believe China’s GDP growth
rate could be close to nine percent in 2010,
but the growth pattern could be an inverse
V-shape. The growth rate in the beginning of
2010 should be stronger due to the momen-
tum of the economy and the lower base for
comparison in 2009. Industries that should
benefit from government policies include
forestry, agriculture, environmental protec-
tion, medical and health, and automotive.
Goldman Sachs recently stated that China
stocks remain “a bright spot” and are set to
rise by as much as 30 percent through 2010
as the nation’s domestic demand increases,
even though concerns over tigher mon-
etary policy will spur volatility. They believe
Investing in China Micro-cap StocksInvesting in China
F I n a n C e
by MattheW hayden, PRESIDENT OF HC INTERNATIONAL, INC.
In 2009 China surprised the world with its strong economic recovery,
which was largely due to unprecedented government stimulus policies
and a strong balance sheet. The GDP growth rate rebounded from 6.1
percent in Q1 to 8.9 percent in Q3. China was expected to exceed its eight
percent growth target for 2009.
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22 Micro-Cap Review Magazine www.microcapreview.com
banks, insurers, Internet businesses, health-
care services, and equipment providers will
do the best. “A property market bubble can-
not be ruled out” if monetary policy remains
“too accommodative for too long,” but they
believe valuations are not stretched. In addi-
tion, Goldman predicts China stocks in 2010
to be strong in the first half of the year, to
experience a pullback at mid-year, and then
find stability and buyers in the third quar-
ter. As liquidity remains strong, it will lead
Chinese stocks to “a strong finish” in 2010.
Are they right? I don’t know, but Goldman is
the ax in many markets and is run by some
of the most intelligent people on Wall Street
who more often than not are able to create
their own destiny.
Getting back to the fundamentals that
most of us can understand, if a company
executes on its growth plan, generates more
cash flow each year, and invests wisely for the
future, its stock price should follow. It does
not mean that the move higher will be in
a straight line, but it is the most important
thing to consider. Thinking along these lines
is better than getting caught up in the noise
which surrounds us each day. Whether the
market is up or down, millions of investors
are trying to figure out what is going to hap-
pen next. Is the market rolling over? Are we
in the next bull market? Is each pullback
just normal backfilling in a move to the next
level?
I must say that the sell-off we saw in
October 2009 in Chinese stocks was so quick
and so dramatic that it caught me off guard
and was as unsettling for most investors. It
looks like deja vu all over again. Let’s face it;
these stocks have had a major run during the
past year. In looking at the 200 companies
on my quote screen, I can easily say that
the average stock is up 100 percent, with
many up two, three, or even five-fold. Can
someone really blame investors for profit
taking? What we have seen in our six years of
following micro-cap and small-cap stocks is
that when the US market sells-off, the China
stocks seem to pullback at least two to three
times of what the overall market does, mean-
ing high beta. So if the S&P goes down five
percent, most micro-cap China stocks are
down 15 percent, something we witnessed
last week. Investors should be aware that
during the past six years the market has
experienced three major sell-offs in China
stocks. The sell-offs occurred even though
the majority of the companies continued to
show very good numbers. This shows us the
macro market and investor psychology. Risk
appetite does have a great deal to do with
how these stocks trade.
It’s interesting to take a 600-foot perspec-
tive and look objectively to see the changes
that have taken place. There are now around
550 China-based companies listed on U.S.
stock exchanges, a significant universe which
offers multiple choices in each industry and
sector. About half of these companies are
listed on a major exchange and the major-
ity have bilingual staff, and most do a
decent job at communicating to English-
speaking investors. Many companies have
made marked improvements over time. Each
year more and more people start to realize
that China is one of the primary growth
engines for the next decade. They buy a few
stocks at first; and if they have success, they
buy more. With larger market capitaliza-
tions, listings, and liquidity, investors will
start seeing larger institutions entering the
market. Over the past few years, I have
seen more marquee small-cap funds get-
ting involved in our China space, including
Heartland Value, Wellington, Fidelity, Royce,
and Janus, just to name a few. While we will
still have meaningful pullbacks, the reality
is that the universe of people investing in
the space has increased dramatically. Over
time the market should become more effi-
cient and support valuations that are more
representative of those in the United States.
Given the environment, investors can argue
that valuations could be considerably higher.
When it comes to volatility, it’s here to stay.
(Factoid: China now represents 9 out of the
top 50 companies in the world measured by
market capitalization, up from only 1 at the
beginning of 2000. The United States cur-
rently represents 21 of the top 50 companies,
down from 29 in the same period.)
Given the worldwide flow of information
and the use of systematic computer trading,
the move toward real-time trading will lead
to markets that fluctuate widely, depending
on the news of the day. We get phone calls
from a lot of individual investors who try to
figure out why a stock went down 15 percent
in a week with no news. While it’s unnerv-
ing, it’s important for people to understand
that this is not unusual. If investors can’t
handle volatility, then they should not buy
these companies. Understanding the rules
of engagement is one of the key variables to
being a successful stock picker. It’s important
for investors to do their homework, particu-
larly figuring out entry points and staying
diligent. This is difficult for most investors
(including me) to do and requires strict
discipline. In the final analysis, it’s the entry
and exit points that investors pay for a stock
which really matters.
It’s also important to consider the huge
disparity between valuations in China and
the United States. In China, investors have
limited investment choices. Stocks are basi-
cally the only liquid asset people can invest
in. So with millions of investors and limited
choices, multiples can easily get stretched.
Looking at the universe of China-based
stocks listed in the United States, many
are trading below 10-times earnings. This
fact offers up the opportunity for multiple
expansions and should enable investors to
see a meaningful return on their investment
while nothing else changes. While invest-
ing in Chinese companies carries inherent
risks, including issues over financial controls,
accounting, and founders maintaining large
ownership positions, the reality is that these
companies have proven how to grow their
business and put capital to work in an accre-
tive manner. As this track record grows and
investors see consistency, they will feel more
comfortable paying up for the higher quality
companies. We are starting to see this now,
but the valuation gap remains meaningful. n
www.microcapreview.com Micro-Cap Review Magazine 23
In one of civilization’s oldest cradles,
an amazing transformation is taking
place. In the past 30 years, China has
been home to the fastest growing economy
the world has ever seen. This is a land where
change is taking place on an unprecedented
scale, where people are living lives unimagi-
nable just a few years ago. This communist
nation has learned how to cash in on capital-
ism. The country and its people are growing
richer and more powerful each day.
It’s impossible to ignore the economic
phenomenon that has unfolded in China
over the past three decades. In 1978
Chairman Deng Xiaoping, the architect of
“The New Socialist Market Economy,” initi-
ated an unprecedented social and economic
transformation that ended Chairman Mao
Zedong’s devastating Cultural Revolution.
The successful implementation of this
ambitious and revolutionary social exper-
iment laid the foundation for what has
funding chinese company growth & going Public in the
united states
funding chinesecompany growth &going Public in the
united states
funding chinese company growth & going Public in the
united states
by beau Johnson
F I n a n C e
24 Micro-Cap Review Magazine www.microcapreview.com
become the world’s most dynamic econo-
my. Since 1992 the country has garnered
annual growth rates averaging near 10 per-
cent. Hailed by the Economist in 2005 as
“The Great Leap Forward” and “A Model
of Reform,” China has emerged as an eco-
nomic powerhouse. It has grown faster
for a longer period than any other country
in history. The People’s Republic of China
(PRC) now accounts for 13 percent of global
gross domestic product (GDP) based on
purchasing power parity (PPP) exchange
rates. Most economists agree that China
will soon surpass Japan in GDP, making it
the second largest economy on earth. Based
on purchasing power measures, China could
reach parity with the United States by 2020.
Even in the face of the most signifi-
cant economic downturn since the 1930s,
China’s economy continues its unprecedent-
ed expansion. The country’s emergence as
an economic superpower is nothing short of
a miracle. But this is only the beginning. As
global economies struggle to get back on
their feet, China has uniquely positioned
itself to weather the economic storm. Last
fall, with the strongest balance sheet on
earth, Beijing put the world on notice that
the PRC was ready, willing, and able to take
its “rightful” place as a new leader on the
global stage.
China is certainly not immune to the cur-
rent global economic downturn. However,
as the rest of the world has slipped into a
deep recession, China continues to expe-
rience impressive economic growth. The
PRC is fiscally sound. The country generates
massive budget and trade surpluses that
are growing every year. Further, China is
not burdened by high debts. The country
has the largest foreign exchange reserves in
the world. But most importantly, due to
the closed nature of its financial markets,
China has not suffered from the illiquidity
and deleveraging dynamics that continue to
hold most major economies down. In fact,
Chinese banks are now among the most
profitable on earth. Even as the rest of the
world scrambles to navigate through these
challenging times, China is once again set-
ting a new course for its future. Using its
considerable resources to sustain growth,
create employment, and increase domes-
tic consumption in ways that significantly
reduce reliance on exports, the China mira-
cle continues.
In an authoritarian political society,
Chinese leaders can adjust fiscal and mone-
tary policy quickly. In response to last year’s
global financial meltdown, Chinese leaders
made a dramatic macroeconomic shift away
from controlling inflation to insuring “stable
and relatively fast growth.” The official
proclamation was, “Growth Above All Else,”
and this policy has become the nation’s top
economic agenda. It has already become the
major driver of the next phase of China’s
development.
To prime the pump, Beijing announced
it would spend an estimated 4 trillion yuan,
(about US$586 billion), over the next two
years in 10 major areas. The new stance
focused on “proactive fiscal policy and an
appropriately accommodative monetary
policy.” The economic stimulus was the larg-
est in China’s history and, in relation to total
GDP, the largest ever initiated by a major
country. The cost for the two-year pro-
gram is 13 percent of GDP compared to 1 to
2 percent of GDP in the United States and
the European Union. Chinese state media
called the plan “a wide-ranging effort to
offset adverse global economic conditions by
boosting domestic demand.”
The stimulus focuses on transportation
infrastructure, environmental projects, and
housing–productive investments that will
boost growth and create employment that
in turn drive domestic consumption. We
expect more measures in the future to stim-
ulate consumption, including policies to
support domestic stock markets and real
property transactions, and increased social
infrastructure spending to boost disposable
income. Further, lower commodity prices,
lower inflation, and lower interest rates in
2009 are a bullish combination for China
domestic consumption themes.
Unlike most of the economic stimuli
initiated in Western economies, China’s had
immediate and significant effect. According
to an article published by the People’s Daily
Online on September 11, 2009, “’China’s
economy has disconnected with other coun-
tries and took the lead in the recovery,’ said
Wang Qing, chief economist of Morgan
Stanley Greater China. The growth rate of
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26 Micro-Cap Review Magazine www.microcapreview.com
China’s GDP growth rate this year, Morgan
Stanley predicted that it would reach 9 per-
cent in 2009 and 10 percent in 2010.”
On July 30, 2009, the Economist reported,
“The gap between growth in emerging Asia
and the G7 has never been wider...China
does not publish quarterly figures, but econ-
omists think its GDP jumped by an annu-
alized 15-17%...In contrast, America and
Europe probably saw their economies con-
tract...Asia’s recovery is on track...Unlike in
America and Europe, where crippled bank-
ing systems and high debts blunt the impact
of low interest rates. Asia, especially China,
is awash with liquidity, which will support
domestic spending.”
On September 18, 2009, the New York
Times reported, “The whole country is back
on track...The Chinese central bank said the
country’s economy surged at an annualized
rate of 14.9 percent in the second quar-
ter. The United States economy shrank at an
annual rate of 1 percent in that period.”
The Economist stated on August 13, 2009,
“China’s economy is roaring back...In dol-
lar terms, the increase in emerging Asia’s
consumer-spending this year will more than
offset the drop in spending in America and
the Euro area. This shift in spending from
the West to the East will help rebalance the
world economy.”
Historically deep worldwide recessions
redirect sovereign wealth homeward. Unlike
the United States and Europe that are forced
to run monetary printing presses at 110 per-
cent of capacity and/or initiate massive tax
and spend policies while borrowing unprec-
edented sums from nations like China to
stimulate their economies, China is awash
in cash. Going forward, if domestic demand
falters, China can use its huge surpluses
to support its economy with even higher
spending and lower taxes.
The fundamentals are clear. China has
enormous excess savings as shown by its mas-
sive current account surplus. Unlike current
conditions in the West, Chinese consumers
are not drowning in debt, and the economy
is not constrained by banks. Household sav-
ings is high and credit card use is almost
nonexistent. To sustain growth and fuel
domestic consumption in the world’s larg-
est market, China has the benefit of US$2
trillion in foreign assets to expand credit to
businesses and consumers alike.
China is rapidly evolving from a nation
that has relied on exports to a nation driven
by domestic consumption. No doubt the
rise of the Chinese consumer is unprec-
edented. But equally important are the
undeniable gains in productivity that huge
investments in infrastructure bring. These
advancements add up to one key take-away
for investors. Productivity increases should
create a new cycle of investment, economic
growth, and prosperity that will benefit all
participants, public and private. Historically
productivity is a catalyst for investment
and higher stock market returns. In the
West, especially in the United States, ris-
ing productivity resulted in rapid economic
expansion accompanied by a financing and
stock market boom for new and expanding
businesses.
The bottom line is that the earth’s axis
is tilting East. On September 15, 2009 the
New York Times said, “China is too small to
‘save the world’, even though it is the first
major economy to pull decisively out of its
downturn. But Beijing has earned respect
for its rapid, overwhelmingly monetary and
fiscal policy response to the crisis, and the
country’s banks have so far sailed serenely
through the storm...China is walking taller
on the world stage than it was a year ago...
It’s not that China has accrued more power
so much as that China is revealing itself as
being willing to wield that financial power
in more diverse ways than in the past. So
it is causing the global community to sit up
and take much more notice...The days when
China was content to sit on the sidelines are
over.”
The Economist reported on August 13,
2009, “Asian’s emerging economies are
recovering much more quickly than econo-
mies in other parts of the world...According
to Barclays Capital, emerging Asia is the
only region in the world where output has
regained its level before the crisis. This is
largely due to China, where industrial pro-
duction rose by 11% in the 12 months to
July [2009], but all the Asian countries have
seen a strong pick-up. In contrast, up to
June [2009] America’s production continued
to fall....If anything, the crisis has reinforced
the shift of economic power from the West
to the East.”
Even though macroeconomic fundamen-
tals in the PRC are stronger than those of any
other country on earth, Chinese companies
listed in U.S. capital markets that have solid
balance sheets, seasoned management teams,
and high growth rates, trade at discounts to
similar companies in more developed mar-
kets. For seasoned investors who understand
China, who have the patience to imple-
ment proven strategies, and who have the
tenacity to get deeply involved, opportunity
abounds. As the world works its way out of
the current mess, China is emerging quickly
into a wiser, wealthier, and more powerful
country. As investors return to the mar-
kets, the fundamental strengths in China are
becoming obvious. There is a clear indica-
tion that this is a resurgent market with the
most potential and the best opportunities
for growth.
History suggests that the Golden Rule will
prove itself once again. Like it or not, world
leaders are coming to grips with the reality
that China is in much better shape than any
other industrialized country. As a result,
China will increasingly be setting global
economic agendas. And the citizens of the
Peoples’ Republic truly believe doing so is
their destiny. Even in the face of global eco-
nomic uncertainty, these are exciting times
for China.
At Chinamerica Holdings, LLC, we believe
that China is on the brink of a long-term
economic and stock market boom—driven
by rising levels of productivity and dramatic
increases in domestic consumption—which
will provide investment opportunities with-
in and beyond its public equity markets. n
www.microcapreview.com Micro-Cap Review Magazine 27
business summAry:
Founded in March of 2006, T3 Motion,
Inc. (T3 Motion) is a California-based
company that specializes in zero-gas
emissions electric vehicles serving the profes-
sional markets of Law Enforcement, Private
Security, Private Industry, Government, and
Military. T3 Motion products are born from
the creative merging of cutting-edge electric
vehicle systems technology, highly-reliable
features necessary for professional fleet mar-
kets, and the unique iconic design charac-
teristics that make them ideal for the profes-
sional fleet market. T3 Motion’s commit-
ment to the vision and creative application
of technological advances has culminated
in their specialized expertise to enhance the
alternative fuel vehicle markets.
A hand-picked team of expert engineers,
veteran designers, seasoned management,
and environmental specialists was assembled
under the T3 Motion banner. This diverse
and accomplished group brought together
world-renowned backgrounds in engineer-
ing and design previously seen in some of
the world’s most celebrated automobiles and
electronic systems.
The challenge for the T3 Motion team,
explore the unfulfilled needs of personal and
fleet transportation through the vision of
professional-grade alternative green energy
vehicle products. Through extensive criti-
cal analysis of the functional needs and per-
formance requisites of the professional sec-
tor, the team focused on creative solutions
for alternative fuel vehicles with emphasis on
integrating its core electric drive system and
power management technology into electric
personal mobility vehicles, electric low speed
vehicles, and converting fossil fuel vehicles
into electric vehicles. In late 2006, T3 Motion
launched the first of many alternative fuel
products, the T3 Series Electric Stand-Up
Vehicle (ESV). Shortly thereafter, in 2008,
T3 Motion launched the CT Series Micro Car
L.S.V./N.E.V. and, most recently, in February
of 2009, completed the first prototype of the
fully electric mail delivery vehicle for the USPS,
the eLLV. From its inception, T3 Motion has
actively pursued cooperative relationships with
organizations in the professional fleet markets
for its design, features, and performance char-
acteristics. This active dialogue has led to a
crystal-clear understanding of the professional
market and demands for the electrification of
fleet vehicles in the marketplace. T3 Motion’s
line of solutions squarely hits the target for
environmentally-friendly, cost-effective pro-
fessional vehicle solutions that is designed to
improve efficiency and provide a return on
investment to its professional customers. As
the marketplace continues to evolve, so will T3
Motion through its commitment to research,
development, and manufacture of vehicles and
products that continue to revolutionize the
way our customers think about transportation.
business strAtegy
T3 Motion’s core strategy is addressing
the increasing need for Law Enforcement,
Government, Military, and Private Security
and private industry with robust, inexpen-
sive, flexible ESVs that also meet increasing
trends for eco-conscious, zero gas emission
vehicles that are not hostage to increasing
fuel costs. The Department of Homeland
Security 2006 budget was $54.9 billion and
the combined annual budget of U.S. police
agencies is approximately $51 billion. T3
Motion believes that the law enforcement
market represents $196 million in potential
sale revenue. Between 2006 and 2009, T3
Motion successfully secured the leading posi-
tion as the preferred ESV solutions provider
in the professional law enforcement market.
T3 Motion has effectively built strong brand
value and awareness in the professional mar-
ket that sets it apart as the iconic professional
image in law enforcement ESV solutions.
Between 2008 and 2009, we further built
upon our success in the law enforcement
market by partnering with the five larg-
est private security companies and national
property management companies to pro-
vide the next generation of cost effective
perimeter patrol solutions. Based on actual
deployments nationwide, customers have
reported an annual cost savings of $17,500
per vehicle deployed as compared to gas
powered vehicles. The Private Security and
Private Industry market represents $585 mil-
lion in potential sales revenue. T3 Motion
is well positioned to expand in this growing
market as many major security partners and
national property management companies
are planning to roll out T3 Motion solutions
on a national and international level.
Between 2008 and 2009, T3 Motion also
began its marketing efforts into the govern-
t3 motion, incC o M Pa n y P r o F I l e
28 Micro-Cap Review Magazine www.microcapreview.com
ment and military market. In 2008, T3
Motion began conducting a trial with the
United States Postal Service (USPS) using a
modified T3 Series vehicle for postal delivery.
In a press release from the USPS in 2008, it
was reported that the energy cost of delivering
mail to over 700 homes was approximately
$0.25 per day using the T3 ESV solution. In
2009, T3 Motion was invited to submit a pro-
posal for the USPS Long Life Vehicle (LLV)
electrification program. The final selection
for contract award of up to 50,000 vehicle
conversions is expected to be announced in
mid to late 2010. In 2009, T3 Motion received
its GSA contract listing and began selling to
all federally funded organizations. In 2009,
T3 Motion successfully completed its trial
with the Defense Logistics Agency (DLA) to
provide vehicles for use in perimeter patrol
and warehouse operations at all military and
government run facilities (6,000 facilities
worldwide). The military market represents
$234 million in potential sales revenue and
the USPS eLLV opportunity represents $1
billion in potential sales revenue.
T3 Motion has over 600 clients and partners
including the top organizations in each mar-
ket such as; LAPD, NYPD, LA Sheriff, Miami
Dade police, G4S Wackenhut, Securitas,
IPC, Andrews International, Allied Barton,
Simon Properties, GGP, Westfield’s, Target
Corporation, USPS, DOJ, DOD, and the DLA.
To date, T3 Motion has elected not to serve
the direct-to-consumer market in order to
maintain a strong professional brand image
and brand value. However, T3 Motion is
active in evaluating the readiness of the mar-
ket to adopt EV solutions such as it CT3 and
GT3 Series consumer commuter products.
T3 Motion believes that the market for
T3 Series and the CT Series vehicles are
equally large outside United States. Between
2008 and 2009, T3 Motion has established
distribution partnerships in Canada, Latin
America, Trinidad, Bahamas, United Arab
Emirates, Saudi Arabia, Turkey, Qatar,
Australia, and is continuing its expansion
into international markets.
mArkets:
Federal / State / County / Municipal Law
Enforcement agencies (18,000 throughout
the U.S.), Mall / Lifestyle Centers /Retail
properties (30,000 throughout the U.S.),
Airports, Ports, Transportation Centers,
Entertainment / Sports venues, Amusement
Parks, Hotels/Resorts, Colleges / Universities
/ K-12 Schools, Hospitals / Medical Centers,
EMS /Paramedic / First Responders,
Warehouses, Factories, Parcel / Cargo
Delivery, and Private Industry Security.
ProDucts AnD solutions:
T3 Series: T3 Motion launched its first
product, the T3 Series professional three
wheeled ESV in October of 2006 at the
International Association of Chief of Police
(IACP) show in Boston, MA. The T3 Series
ESV was designed for the Law Enforcement,
Government, Military, Private Industry, and
Security markets. The T3 Series ESV features
a stable elevated platform, an authoritative
command presence, a zero-degree turning
radius, integrated LED lighting, and unlim-
ited range via field swap-able, rechargeable
power module. The company currently has
over 1,700 units in the market.
The T3 Series ESV is a three-wheeled,
front-wheel drive stand-up electric pro-
fessional personal mobility vehicle. It was
designed and developed as a professional
tool to address the needs of law enforcement
patrol, campus policing, community policing,
airport security, military base security, mall
security, patrolling of parks and beaches, as
well as private security and private industry.
The T3 Series is perfectly suited for enforce-
ment operations in parking lots, parking
structures, inside large commercial buildings,
around building perimeters, as well as side-
walks and roadways connecting those areas.
The elevated platform of the T3 enables offi-
cers/security personnel to see above parked
vehicles in a discrete observation position.
The operator can effectively patrol a larger
area than on foot or riding a bicycle. The
elevated platform of the T3 Series allows the
operator to safely and quickly maneuver in
crowded pedestrian areas. The design of the
T3 Series lends itself to interaction between
operator and the public.
ct micro cAr:
In order to capitalize on T3 Motion’s core
competencies in power management and
drive systems, the company has developed
the core platforms necessary to market new
products into existing markets and future
growth markets. In late 2008, T3 Motion
introduced the four-wheel electric CT Micro
Car (L.S.V./N.E.V.) into its established mar-
kets, using the market penetration driven by
the successful introduction of T3 Series ESV.
fleet vehicle solutions:
With the professional marketplace actively
searching for environmentally-conscious
and professional application vehicles, the T3
Motion electrification of fleet vehicles is an
immediate response to the needs of the pro-
fessional community. The T3 Motion solu-
tion is incredibly effective in a variety of day-
to-day professional applications and provides
an effective way to reduce both the cost of
www.microcapreview.com Micro-Cap Review Magazine 29
fleet ownership and carbon emissions.
Many companies are grappling with the
need to cut costs and reduce carbon emis-
sions. Their vehicle fleets represent a signifi-
cant portion of this challenge. Fleet managers
are searching for the best ways to achieve
both goals, thus driving further investigation
of electric vehicles as an alternative to inter-
nal combustion engine vehicles. Traditionally
included in a business case for vehicles, life-
time costs of the vehicles are acquisition costs,
fuel costs, maintenance, and residual value,
however, fleet managers are now required to
begin including the cost for emissions.
As all of these factors become increasingly
important, and as commercial vehicle reg-
istrations and fleet sales rebound from the
economic downturn in 2010 and beyond, T3
Motion anticipates that Electric Vehicles will
become a major focus for fleet operators in
key markets around the world.
cleAn energy = green
results:
The zero-gas emission T3 Series gets the
equivalent of over 250 miles a gallon. In addi-
tion to being environmentally friendly, the T3
Series is also extremely cost-effective. The T3
Series uses about 1.5 kilowatt of electricity
to fully recharge in less than 4 hours. Based
on California energy rates, the T3 Series costs
ten cents a day to recharge (based on $.10 per
Kilowatt per hour). Per mile, the energy costs
are a half cent (based on $.10 per Kilowatt per
hour). The electrical recharge costs for a dis-
tance of 10,000 miles is less than $60 (based on
average daily operation range of 15-20 miles).
The T3 Series is a truly an unlimited
range electric vehicle. With a second set of
batteries (“Power Modules”), the T3 Series
is the first multi-shift electric professional
personal mobility vehicle designed for pro-
fessional applications. With two sets of (Type
B) Power Modules, the T3 Series is capable
of 24-hour unlimited range operation. The
Power Modules can easily be hot-swapped in
less than one minute.
T3 Motion, Inc. has conducted third party
research with multiple national security, prop-
erty management, and law enforcement enti-
ties. The T3 Motion, Inc. fuel cost analysis was
focused on the use of electric T3 Series vehicle
versus a gasoline-powered automobile/SUV
for outdoor patrol-based applications.
The initial data gathered from these agen-
cies reveals an average annual savings of
$12,000 to $15,000 per gasoline powered
vehicle per year (based on $2.00 per gal-
lon). This annual savings range includes the
purchase price of the T3 Series vehicle. After
amortizing the cost of the T3 Series purchase
beyond the first year, the annual fuel cost
savings increases to $18,000 to $25,000 per
gasoline-powered vehicle per year.
The T3 Series electric professional per-
sonal mobility vehicle is the ideal solution
for outdoor patrols like parking facilities,
perimeter security, sporting/concert venues,
business districts, and community relations.
At T3 Motion, Inc. we believe that our tech-
nology should be a benefit to both our profes-
sional-end users and the environment. The T3
Series ESV electric personal mobility vehicle is
one of the most energy efficient ways to patrol
from Point A back to Point A—the operator
begins and ends at the same point-without
producing any environmentally harmful gas
emissions. The T3 Series ESV proves that clean
energy can also be cost-effective.
strAtegic PArtnershiPs:
T3 Motion has developed partnerships
and associations to further the visibility of
both T3 Motion and T3 Motion products.
These dynamic partnerships include the
Safe City Foundation (www.mysafecity.com)
Corporate Sponsor, International Association
of Campus Law Enforcement Administrators
(IACLEA) Titanium Sponsor, the Association
of the United States Army (AUSA), the Western
Riverside County Council of Governments
(WRCOG), and the South Coast Air Quality
Management District (SCAQMD).
Strategic sales partnerships include
Target Corporation, Marriott Resorts, IPC
International, Simon Property Group,
Andrews International, Securitas, Valor
Security Services, Wackenhut, Allied Barton,
Glimcher Realty Trust, Security Industry
Specialists, United Security, Inc., First Alarm,
and General Growth Properties.
meDiA coverAge:
The T3 Series ESV has generated worldwide
media coverage from network, cable and local
television to local newspapers to national and
industry magazines to all manner of Internet
blogs. For T3 Series customers, it is an oppor-
tunity to share with the public their myriad
of reasons for making the leap to clean tech-
nology. Whether it’s increased efficiency,
lowered operating costs, carbon reduction, or
good old fashioned community relations, T3
Motion’s products make it very easy for their
customers to tell their tale. n
Disclaimer: This corporate profile is based upon information provided by the issuer or company representative.
The information is not intended to be, and shall not constitute, an offer to sell or solicitation of any offer to buy
any securities. It is intended for information purposes only, and to increase awareness of the company profiled.
Safe Harbor Statement: The statements in this advertorial or profile relating to future products, partnerships,
technology, and positive direction are forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Some or all of the aspects anticipated by these forward looking statements may not,
in fact, occur. Factors that could cause or contribute to such differences include but are not limited to contractual
difficulties, demand for the Issuer’s common stock, and the company’s ability to obtain future financing. Micro-cap
Review Magazine may have received payment to publish and print this advertorial or corporate profile. Micro-cap
Review Magazine disclaimers apply and may be reviewed at www.microcapreview.com/disclaimer.php. Before
investing in any security, you are strongly advised to review all public filings of the issuer of such security, which
can be found at www.sec.gov, as well as warnings published by the SEC at www.sec.gov/investors and to consult
with your professionals.
30 Micro-Cap Review Magazine www.microcapreview.com
www.microcapreview.com Micro-Cap Review Magazine 31
We live and work in an ever-chang-
ing environment, surrounded by
technological advances. Courts
and regulatory bodies in many business
and professional disciplines are embracing
electronic filings, and many businesses have
embraced telecommuting and electronic com-
munications. The world that we live in has
made it possible for attorneys and paralegals
to become mobile and virtual, allowing attor-
neys and other legal professionals to utilize
experienced professionals efficiently and eco-
nomically. Today’s economic environment
continues to challenge legal professionals to
reduce expenses while finding ways to help
clients increase their bottom line.
The use of efficient technologies and expe-
rienced professionals is becoming ever so
important, and has created an environment
in which virtual legal services can succeed
and grow. As virtual legal services are com-
ing into their own, it is becoming increas-
ingly possible for legal services providers to
serve clients across borders.
enter vcorP services, llc.
Vcorp Services, LLC has developed relation-
ships with law firms that are serving Israeli
businesses. Its objective is to assist Israel-
based investors and entrepreneurs establish
their US corporate entities in the United
States. Israel is a small and young country,
yet it has a strong economy, a modern bank-
ing system, an educated population, and laws
aimed at attracting foreign investors. Israel’s
high-tech industries, including the life-sci-
ences industries, are among the world’s most
robust. The Israeli business scene is heav-
ily dependent on international commercial
activity. Many of these companies turn to the
United States for financing.
Law firms and CPA firms in the United
States spend much of their time and energy
connecting Israeli companies with US investors
and financiers. Vcorp Services, LLC is devel-
oping relationships with law and accounting
firms that serve international businesses. The
professionals at Vcorp continually look to
forge relationships with investor groups and
law firms with corporate and commercial
law practices in diverse industries, including
hi-tech, securities, finance and banking, intel-
lectual property, media, telecommunications,
real estate, and international trade.
Operating in virtual environments is
becoming the natural evolution of the legal
industry. We are connected by phones and
computers. Attorneys and paralegals tele-
commute. Courts and state regulators have
embraced technology and electronic filing.
Lawyers communicate with their staff via
e-mail and text messaging. It is in this envi-
ronment that Vcorp Services continues to
develop its cross-border relationships and
provide expertise in corporate services to
clients worldwide. n
C o M Pa n y P r o F I l e
Disclaimer: This corporate profile is based upon information provided by the issuer or company representative.
The information is not intended to be, and shall not constitute, an offer to sell or solicitation of any offer to buy
any securities. It is intended for information purposes only, and to increase awareness of the company profiled.
Safe Harbor Statement: The statements in this advertorial or profile relating to future products, partnerships,
technology, and positive direction are forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Some or all of the aspects anticipated by these forward looking statements may not,
in fact, occur. Factors that could cause or contribute to such differences include but are not limited to contractual
difficulties, demand for the Issuer’s common stock, and the company’s ability to obtain future financing. Micro-cap
Review Magazine may have received payment to publish and print this advertorial or corporate profile. Micro-cap
Review Magazine disclaimers apply and may be reviewed at www.microcapreview.com/disclaimer.php. Before
investing in any security, you are strongly advised to review all public filings of the issuer of such security, which
can be found at www.sec.gov, as well as warnings published by the SEC at www.sec.gov/investors and to consult
with your professionals.
vcorp and the global economy
32 Micro-Cap Review Magazine www.microcapreview.com
Israelis made the desert bloom, fought and
won major wars, and absorbed poorly edu-
cated and penniless immigrants. The country
did all of this while creating a dynamic com-
munity that has benefited the world. The
role of Israel in the global economy and the
reasons for its success are explained in two
new books, Start-up Nation by Dan Senor and
Saul Singer and Israel Test by George Gilder.
Dan Senor, former civilian spokesper-
son for the Coalition Provincial Authority
in Iraq, collaborated with Jerusalem Post
columnist Saul Singer to inform the world
about Israel’s unique contributions. The facts
astound even the knowledgeable. There are
more NASDAQ-listed companies in Israel
than in all of Europe or the eastern powers
of China, Japan, Korea, and India combined.
Israel attracts more venture capital than any
other country, except for the United States.
And on a per capita basis, Israel exceeds the
United States by two and a half times. Israel
has contributed to the intellectual property
that enables Intel, Cisco, Google, Microsoft,
and eBay to advance productivity in the 21st
century economy. Intel trumpets the Pentium
microprocessor, but it may be more accurate
to declare the slogan, “Israel Inside.” The
technological innovations that permitted a
faster, better chip were conceived by a com-
bination of Israeli genius and temerity. Intel
produces its cutting edge chips in Qiryat Gan
in a 3.5 billion dollar facility in Israel.
Start-up Nation epitomizes the secret
sauce that accounts for Israel’s unprece-
dented productivity. The authors note what
Harvard Business School professor Michael
Porter calls “clusters” made up of universi-
ties, educated workers, and entrepreneurial
risk takers in explaining Israel’s economic
miracle. The military experience and cul-
ture are formative characteristics. Americans
identify themselves with Ivy League creden-
tials, whereas service in elite military units
defines Israelis. The Talpiot unit recruits
the best and the brightest from Israel’s high
schools and trains them in math and physics
to preserve the nation’s mandatory techno-
logical superiority as a condition for surviv-
al. Individual initiative and decision mak-
ing are cultivated. Officers are addressed
by first name and soldiers can challenge
the wisdom and judgment of superiors.
Israelis network in the military and bring
their skills, teamwork, and higher sense of
purpose to the business sector.
G e n e r a l
Start-up Nation Exceeds on the Test
Israel is a young country, plagued by hostile neighbors, perpetual secu-
rity threats, an Arab boycott, and an absence of natural resources. It was
a start-up country that succeeded beyond the world’s imagination.
by larry May
www.microcapreview.com Micro-Cap Review Magazine 33
Israel has produced some corporate giants,
including Teva in pharmaceuticals, Lumenis
in medical lasers, and Checkpoint in Internet
security. Many Israeli technology start-ups
are bought by American companies. Cisco is
a prime example, having purchased nine cut-
ting-edge Israeli companies. Warren Buffet, the
oracle of Omaha, made his first foreign invest-
ment by purchasing Iscar, an Israeli machine
tool company, for US$4.5 billion. A myriad
of Israeli companies are working to improve
the health and welfare of the world in medi-
cal devices, pharmaceuticals, and biotechnol-
ogy. The world of computers, cell phones, and
wireless connectivity is dependent on Israeli
technology to sustain and improve.
Senor and Singer do an admirable job
of telling the history of a unique country
and the economic engines that power its
trajectory forward. The facts tell the story of
incomparable achievement and the stories
tell an emotionally engaging narrative of
how individuals and a society can flourish
in spite of insurmountable adversity. From
the challenge of Israel’s war of independence
to its economic devastation of the 1990s and
the omnipresent threats to security, Israel’s
lessons are powerful and persuasive. It pro-
vides a model for other smaller countries
with gifted populations, such as Singapore,
South Korea, and Taiwan, and lessons to
restore the spirit of innovation, ingenuity,
and invention that made America great.
Start-up Nation is a must-read for anyone
interested in how countries, businesses, and
people succeed against all odds.
While Start-up Nation is apolitical and
minimizes the special Jewish ingenuity and
enterprise that define Israel, George Gilder’s
contemporaneously published book The
Israel Test frames the argument that Israeli
achievement is a boon to civilization, not the
cause of the poverty of its Arab citizens and
the surrounding Muslim world. The book
is an articulate and convincing dissertation
that capitalists create opportunity, wealth,
and a better quality of life for many peo-
ple. An example is Israeli entrepreneur Shai
Agassi’s plan to decouple automobile travel
from oil which may be the world’s salvation
from the distorting economics and pollution
of fossil fuels.
George Gilder explains much of Israel’s
entrepreneurial spirit and success in terms
of Jewish scientific excellence and entrepre-
neurship that have spanned other cultures
and decades. His analysis focuses on a soci-
ety that elevates intellectual achievement, a
protestant work ethic, and ambition rather
than force and violence. His earlier book,
Wealth and Poverty, was a persuasive argu-
ment for capitalism, and The Israel Test is
the triumph of a successful capitalist society
that concentrated Jewish genius. He does
an excellent job of recording the history of
Israel as a counterpoint to the current eco-
nomic activity perpetrated on the world by
Arab governments and its debilitating effects
on Palestinians in the territories.
Gilder describes early economic experience
in Israel as pathetic, portraying the Israelis
“as mendicant nebbishes” touring the world,
tin cup in hand. Gilder critiques the socialist
fantasies of Israel’s early love affair with the
infertile soil and labor unions embodied in
the histadrut. Throughout the 1990s the gov-
ernment was the major owner of banks, cor-
porations, and real estate. Gilder attributes
Israel’s success to Prime Minister Benjamin
Netanyahu’s financial reforms, an influx of
Russian scientists, and the influence of retired
American capitalists. The confluence of these
trends took Israel from last among indus-
trialized nations to second behind only the
United States in the key fields of telecommu-
nications, microchip software, biopharma-
ceuticals, medical devices, and clean energy.
Adjusted for population, Israel decisively has
exceeded the United States.
The chapter on current Prime Minister
Benjamin Netanyahu is informative, maybe
a little too effusive. Gilder’s digression on
game theory and the contributions of John
Van Neumann detracts from the book’s
more salient arguments. Notwithstanding
Gilder’s self indulgence, The Israel Test rein-
forces Start-up Nation with complementary
and additional compelling narratives.
There are many Israeli companies deserv-
ing investor attention. Many are small-caps
and need an introduction to the readers
of Micro-cap Review magazine. There are
pitfalls in investing in Israel where business
is dominated by a few investment banks
and wealthy families. Information is often
published in Hebrew and there is little cover-
age of Israeli firms by America’s investment
companies. Against these challenges is the
prospect of great opportunities to improve
the human condition and for profitable
investment in the world’s most successful,
quintessential start-up nation.
About the Author
Dr. Larry May is a Phi Beta Kappa graduate from
Harvard University and received his M.D. degree
from Harvard Medical School. He is the former
chairman of the medical advisory board of Herbalife
and is the medical director of Targeted Medical
Pharma. Dr. May is on the faculty of the UCLA
School of Medicine and currently practices medicine
near Los Angeles. He has been consistently recog-
nized by peers as being among the best doctors in
the country, having been included in the publication,
Best Doctors in America. n
senor and singer do an admirable job of telling the his-
tory of a unique country and the economic engines that
power its trajectory forward.
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www.microcapreview.com Micro-Cap Review Magazine 35
In an economy with double digit unem-
ployment, many companies believe that
they should be less worried about find-
ing employee talent. Besides, a swell of well-
trained, experienced professionals walk the
streets in suits. People go from networking
event to career fair to outplacement center,
ever in search of jobs that are in short supply.
Jim Lehrer’s News Hour recently profiled
a career fair for experienced candidates, all
of whom lined up along a major New York
City thoroughfare to share their resumes
with potential recruiters. But once inside,
candidates were presented with a host of
“opportunities,” such as Cash For Gold in-
home sales and schools that teach in-home
massage. One former telecommunications
executive walked away with a job offer from
an alternative energy company – for two-
thirds of his previous salary and no benefits
– which, in his words, “beat being unem-
ployed for the last full year.”
Thus is the current state of the economy
and morale of our workforce. Professionals
who will survive in this recession are the
ones who are proactive and flexible. Those
who have a job should pay attention to their
current situation and avoid making risky
moves. To help stand out from the crowd
and avoid pitfalls, existing managers should
keep the following points in mind, accord-
ing to Jason Gennaro, Recruiting Director at
Spectrum Careers in McLean, VA.
1) Managers should take a second look
at the job description to see that it match-
es their core capabilities. What was once
labeled “sales” may now be more marketing-
focused. Would accepting an offer to head a
sales team be the right move to make?
2) Managers should learn to “manage up.”
They should communicate and quantify to
senior management and other stakeholders
the value that managers make on a regular
basis.
3) Managers should also learn to “manage
down.” They should select and cultivate the
right people under them to develop the best
functioning team possible.
Micro-cap companies should take a lesson
from companies that survived The Great
Depression of the 1920’s. As was the case
then, companies today should pay attention
to key areas:
1) Focus on a few things and do them well.
2) Rely on family and friends for support
but ultimately be responsible for the outcome.
3) Apply a mixture of Toyota’s Lean
Manufacturing and Jack Welch’s 10 Percent
Rule to ensure your human capital is focused,
hungry, and collaborative.
One company in particular is leading
the way in human capital development.
Established in 1996 in Florida, Assessment
Technologies Group, Inc. (ATG) helps com-
panies manage talent more effectively. Their
system, ATGenius, works through four inter-
locking processes which include 1) leadership
development and training, 2) performance
enhancement, 3) sourcing and selection, and
4) organizational design and development.
“ATGenius builds productive individuals
and organizations by helping organizations to
select precisely the right person for every job,
build more effective and efficient teams with-
in the organization, strengthen leadership
in the organization, facilitate organizational
change, and improve employee productivity
and commitment, and operate at peak per-
formance with lower costs,” states Stephan
Pollan, Chief Executive Officer of ATG.
Based on the six points above, ATG’s sys-
tem is the necessary ”secret sauce” for indi-
viduals and companies focused on thriving
in the current recession.
ATG’s Senior Organizational Consultant,
Renee Gillespie, Ph.D., works with clients to
implement day-to-day organizational practic-
es, policies, and management styles that sup-
port employees at all levels and their custom-
ers. Her work focuses on the following areas:
• Facilitating decisions to help stakehold-
ers work across personal, professional, or
cultural differences
• Building teams and one-on-one relation-
ship management
• Developing talent to fit the organization
• Promoting relationship selling
• Managing conflict resolution
• Harnessing the power of company stories
• Managing company talk
To lift the economy from the doldrums,
it is essential that smaller companies not
only survive but succeed. Proven case studies
can help managers of micro-cap companies
learn useful tips and avoid costly mistakes.
Readers that come across micro-cap com-
panies with unique or innovative practices
should share them with us.
In the interim, companies should assess
their human capital needs and consider
whether an integrated approach would
improve the business model. Are prospects
being sourced from optimal sources or just
daily want-ads? Are current employees able
to do exponentially more with some leader-
ship training and development? Is the orga-
nization structured in an optimal way? The
right answers to these questions are essen-
tial to the company’s survival… and more
importantly to its success–post-recession.
About the Author
M. C. Elvis Oxley is President of Oxley Consulting,
LLC (www.oxley-consulting.com) and an adjunct
professor at The George Washington University
Graduate School of Political Management. n
C o M Pa n y P r o F I l e
managing talent in a Downturn economy – Assessment technologies group
by M.C. elVIs oXley
36 Micro-Cap Review Magazine www.microcapreview.com
Many industries were turned
upside down in the stock mar-
ket in 2009. One of the hardest
hit for investors was the junior minerals
exploration industry. The reason for this
was simple. For many years before 2009,
most junior minerals exploration compa-
nies operated based on one business model.
That model usually entailed the following
steps. First, companies would find a prop-
erty with suspected mineral reserves, then
they would identify the reserves, and then
would “prove out” such reserves by con-
ducting geological studies and “drill pro-
grams” to determine the amount of reserves
and their recoverability. After reserves are
quantified, companies would then imple-
ment a mining program and begin produc-
ing on those reserves using capital raised in
public markets.
In the past this model worked because
larger companies had little interest in explor-
ing for and proving reserves, which inherent-
ly had high risks and costs. Larger companies
depended on smaller companies that could
raise money in capital markets to “flesh-out”
good properties. Once this had been accom-
plished, those smaller companies would then
develop the properties or sell those proper-
ties to larger mining companies.
The economic crisis has inflicted pain on
many of these junior exploration companies.
Many investors withdrew their money from
this market, which led to a severe shortage of
capital to “prove-out” reserve properties. The
credit crunch damaged those junior explora-
tion companies whose business model was
based solely on reserve values.
Basically, the market said, “We are unwill-
ing to fund exploration of your assets if you
can’t in short order show revenue from your
properties.”
For years mineral exploration companies
raised capital based on proved reserves value
and used the funds to prove out still more
reserves. The process continued until the
company began producing or sold the prop-
erty to a larger mining company. For many
years, the reserves value alone was enough
Junior mining and exploration Investment Strategies In 2010
F I n a n C e
by ray suPrenard
www.microcapreview.com Micro-Cap Review Magazine 37
to produce a large market capitalization. Not
anymore.
The exploration companies that were in
this predicament had two choices. Companies
either continued the existing business model
and hoped that the market would return, or
re-focused their strategy and began produc-
ing from their properties and grow the com-
pany using that production.
Many of the junior mining companies that
chose the former have either lost most of
their market value, or they failed and went
out of business. The ones that chose the lat-
ter have had the benefit of revenues, as well
as a portion of their reserve values capital-
ized as assets on the balance sheet. This is a
best-of-both worlds scenario.
Matmown, Inc. was one company that saw
this trend occurring before the markets cor-
rected. Founded in 2005, Matmown decided
to restructure the business into an asset/
revenue model, while remaining a private
company during the current environment.
In 2009 the company moved ahead with set-
ting up production on their primary copper
property in Chile and returned to produc-
tion on their primary gold property in Peru.
While their main copper property in Chile
was significant, they actually had very solid
production in 2006 on their 7,000 hectares
gold property in Peru; in fact, they produced
at an average grade of 16.4 grams per/ton,
which was an extremely high grade produc-
tion by any standards.
While this is good production, readers
might ask the question, “Why mine in South
America as opposed to North America?”
To answer that question, it’s helpful for
readers to obtain some background facts.
Peru is one of the top ten gold producers in
the world and one of the top five silver pro-
ducers. Chile is the number one producer of
copper. Both countries share similarities in
that mining is a primary source of revenues,
and most of the mining operations are
undertaken by foreign companies. Mining
companies choose to operate in Chile and
Peru primarily because of the lower labor
and extraction costs.
North America has many rich mineral
deposits. The problem with exploiting those
properties has to do with economics. Labor
costs in North America are among the high-
est in the world; couple that with higher
costs for goods, equipment, and stricter
reparation factors, the total production cost
is often greater than the value of the min-
erals extracted. This creates a net loss for
companies.
These cost factors, however, are lower in
both Peru and Chile. The lower costs mean
that minor mineral deposits can often be
exploited profitably. Further, major min-
eral deposits allow companies to earn sig-
nificantly higher profits than if those depos-
its were located in North America. The
increased revenues can prove significant in
the valuation of a company’s stock and to the
overall growth of a company.
Taking all of the above factors into
consideration, investors should focus on
exploration mining companies with certain
attributes. Investors should look for com-
panies that are increasing both revenues
and assets through production and explora-
tion. Moreover, such companies should have
assets located in highly stable, low produc-
tion cost countries, such as Peru and Chile.
Matmown is one company that has been
structured in precisely this way. In addition,
the company has a highly experienced man-
agement team that knows how to develop
private and public companies within mul-
tiple industries. Management has solid rela-
tionships with people in the financial mar-
kets and can eminently prepare Matmown
to become a public company. Management
has one of the best short and long range
approaches to asset development and rev-
enue growth that I have seen. Frankly speak-
ing, investors should pay attention to this
company in 2010.
About the Author
Ray Suprenard started his first company while he was
still in college for less than $2,000. He built that into
a multi-million dollar business within three years.
Upon graduating from college, he began focusing
his efforts on undervalued asset acquisition, interna-
tional trade, and international business development.
Over the last 17 years, this global strategy has enabled
Ray to be involved as a principal and/or consultant
for multiple companies in multiple industries and
jurisdictions throughout the world. He is recog-
nized as an expert in the trading of international
commodities, including but not limited to precious
metals, base metals, and oil. Additionally, as a prac-
tical expert in corporate financing and company
expansion, he is currently involved with many of
the largest private equity funds in the world, assist-
ing them in asset allocation and primary corporate
investments. n
investors should look for
companies that are increasing both
revenues and assets through produc-
tion and exploration. Moreover, such
companies should have assets located
in highly stable, low production cost
countries, such as Peru and Chile.
A CEO Road Map for SUCCESSFind Investors, Shareholders, Professionals and Traders
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www.microcapreview.com Micro-Cap Review Magazine 39
❏ A Honey Pot of Stupendous Resources
for the Next Millennium
❏ Supplying the World with Copper, Gold,
Coal, Molybdenum, Silver, Tungsten,
Rhenium, etc., etc., etc.
❏ More on: Beyond Superlatives and
Introducing a New Undiscovered Micro-
cap that’s a Key Part of the Play*
❏ • Ivanhoe Mines, Inc (NYSE: IVN) $13.70
– Market cap $5.8 billion
❏ • Mosquito Consolidated Gold Mines
Limited (CVE: MSQ.V) $1.21 – Market
cap $71 million
I’m itching to tell the Mosquito story*
(see below) but let’s first talk about the
country that will rewrite the natural
resources playbook over the next century—
Mongolia—and the company that brought
the world’s eyes to it–Ivanhoe Mines and its
Oyu Tolgoi mine, the world’s largest copper-
gold development project.
Mongolia is big. It is three times the size
of France or twice the size of Texas, but with
only 2.6 million people. The prestigious
Mining Journal has described Mongolia as a
country with “world-class mineral deposits
and huge potential with 70 percent of the
country remaining unexplored.”
I visited the Ivanhoe’s Oyu Tolgoi (Turquoise
Hill) project in southern Mongolia twice, first
in 2005 and again in 2006. In 2003 I discov-
ered Oyu Tolgoi back when Ivanhoe Mines
was much like tiny Mosquito, unknown and
undiscovered by investors. Now Ivanhoe’s
Oyu Tolgoi is the world’s largest copper-gold
development project, located 80 km north of
the China border. The company’s shares have
had a huge run, and I believe the stock price
has a lot more room for growth yet. There is
also a humongous coal deposit nearby, and it
too is part of the Ivanhoe story.
The visits to the Ivanhoe mine and coal
sites were made with a group of interna-
tionally known investment bankers, money
managers, analysts, geologists, and mining
experts. The trips were an eye opener, to put
it mildly. Not only did I ride a camel, but I
discovered Ivanhoe to be one of my “Best
Ideas” in those years. The stock obviously has
been a big winner since then.
On October 6, 2009 Ivanhoe Mines
reached an agreement with Mongolia that
finally spelled out the “tax take” by the
government. The deal will set off a mining
boom that is going to ignite the country’s
economy and bring many jobs and benefits
to the people there. Fueled by a free market
economy, investor-friendly mining laws, and
new mineral discoveries, Mongolia is quickly
becoming China’s Canada. In fact, it’s a cer-
tainty that Mongolia will become a stagger-
ingly prosperous nation much like Kuwait.
What Ivanhoe found buried in the vast-
ness of the Gobi Desert is a 6.6 kilometers
long, 1.5 kilometers deep, and about 1 kilo-
meter wide copper and gold ore body, the
likes of which have not been discovered on
planet Earth in over 50 years. So far, over one
million meters of sample cores have delin-
eated the positioning, the size, and the grade
of this immense deposit.
It’s important to note that the Oyu Tolgoi
project is being engineered, overseen, and
built out by John Macken, Ivanhoe’s presi-
dent and CEO. Some time ago Mr. Macken
finished building out Grasberg, the world’s
largest ever operational copper-gold mine
in Indonesia. Freeport-McMoRan (FCX), a
company with a market capitalization of $37
billion, owns 66 percent of Grasberg.
At full production (six years out), it is esti-
mated that Ivanhoe’s Oyu Tolgoi mine can
produce approximately 1.6 billion pounds of
copper and 900,000 ounces of gold per year.
At $1.00 per pound of copper (current price is
$3.39), you can figure the yearly cash flow. And
with the benefit of by-product accounting,
allowable under US GAAP, the gold content in
the ore will pay virtually all of the production
costs of the copper. Here’s some hypothetical
math: at $1.00 per pound times 1.6 billion
pounds equals $1.6 billion a year. At $3.00 per
pound times 1.6 billion pounds equals $4.8 bil-
lion a year. (That’s just the copper; add the gold
and – goodness that’s a bunch of cash flow.)
The Oyu Tolgoi deposit contains 78 billion
pounds of copper resources and 45 million
ounces of gold resources, based on a March
2008 estimate. It should be noted that the
project is well into development with over $1
billion “spent” in the ground to date.
So get the picture: the Mongolians (and
Ivanhoe) are sitting on some stupen-
dous natural resources. Mining is already
Mongolia’s single largest industry and is
growing in high double-digit increments,
but it is still in its infancy.
F I n a n C e
O N T H E M A R K E TCommentary and Insights
by dr. John Faessel
40 Micro-Cap Review Magazine www.microcapreview.com
Ivanhoe’s Oyu Tolgoi project also now
includes partner and mighty resource player,
Rio Tinto (RTP) [$161.56 NYSE market-cap
$89 billion], which bought into Ivanhoe in
2006. The Rio Tinto equity investment in
Ivanhoe is now well over US $1 billion, or
19.7 percent of the company. This amount
will likely increase up to approximately
US$2.3 billion in the near future.
On December 7, 2009 John Macken
announced that the joint Ivanhoe Mines-
Rio Tinto Oyu Tolgoi Technical Committee
had approved a conditional US$758 million
budget for 2010 to bring the project into
production. In the press release Mr. Macken
said, “Ivanhoe is considering a schedule that
could see construction of the initial open-pit
mine completed in 2012 and commercial
production begin in 2013.”
* now whAt About
ivAnhoe’s coAl?
Down in southern Mongolia just 25 miles
from the China border resides a coal mine
called Ovoot Tolgoi. It is the world’s larg-
est producer of metallurgical and thermal
coal. Ivanhoe spun off Ovoot Tolgoi to
South Gobi Energy Resources Ltd. (SGQ-
V), while taking a 80 percent ownership in
South Gobi—soon to be a Hong Kong IPO,
I’ve heard.
The dimensions of the coal resources are
staggering. While most coal seams in North
America might be four yards thick in some
places, Ovoot Tolgoi has coal seams that are
as big as 100 yards thick, and the deposit
has multiple seams of this quality and size
according to evaluations of preliminary core
drilling. Okay, so the coal resources are rich
in grade and thicker than a 30-story build-
ing, but what about the outside dimensions
or length of the coal body? Astonishingly,
the coal seam is one of five conformable
seams and has been mapped in outcrop and
sub-crop throughout a major coal basin that
stretches a total of 75 miles east and west
of the Ovoot Tolgoi mine on South Gobi’s
claim.
South Gobi plans to produce between 4
million and 6.5 million tons of coal in 2010
and 2011, respectively. Measured and indi-
cated coal resources at Ovoot Tolgoi have
been upgraded to total proven and probable
reserves of 114.1 million tons, with 92 per-
cent of the reserves in the proven category.
Total coal resources are thought to be over
412 million tons. South Gobi has 43 licenses
covering 16,000 km² in southern Mongolia.
The quality of the coal is super high-
grade. It contains virtually no ash or sulfur
and is of extremely high calorific value. You
don’t have to mill it, you don’t have to wash
it, you don’t have to clean it, and you don’t
have to process it; all you have to do is sell it
and you can mine it for a dollar a ton. This
coal is of such high bituminous rank that
it can be gasified or liquefied. Metallurgical
coal sells for about $140 a ton and is an
ingredient in steel production.
Norwest Corp., the world’s preeminent
coal engineering company, has independent-
ly estimated the dimensions and grade of the
South Gobi coal resources.
Ivanhoe is scooping out this coal from
the South Gobi open-pit mine around the
clock. The coal is being sold to the Chinese
and picked-up by a virtually never-ending
convoy of trucks.
China’s coal production last year was up
7 percent from 2008. Roughly 90 percent of
China’s electrical plants run on coal. China
produced 43 percent of the world’s coal last
year, but it wasn’t nearly enough to meet
demand. A new part of the Ivanhoe mosaic
has also taken shape: it’s the build-out of a
new rail link from an important steel mill
near Beijing to the Chinese border with
Mongolia.
The supply/demand/value and price met-
rics of coal look dazzling to me. China today
is the world’s largest consumer of metal-
lurgical and thermal coal. Coal provides up
to 70 percent of China’s energy, and some
analysts believe that prices for coking/metal-
lurgical coal, the form used in steel produc-
tion, will continue to rise. In the first 11
months of 2009, China’s crude steel produc-
tion increased to nearly 518.2 million tons,
up 12.1 percent over the first 11 months of
2008. Meanwhile, finished steel production
from January to November 2009 was up 17.4
percent to 628.3 million tons. It’s easy to see
that the math for coal is in favor of increas-
ing demand and price.
* now About mosquito
Much like Ivanhoe Mines, this story has
legs and legs and legs! And if investors
missed the boat early on Ivanhoe, Mosquito
has compelling parallels.
Headquartered in Vancouver, Canada,
Mosquito Consolidated Gold Mines Limited
is a mining exploration and development
company. It has a diverse portfolio of high-
potential precious and base metals projects
that are located in low-political-risk areas in
North America and Australia.
That’s the sterile version of what they do.
The color story, much like that of Ivanhoe
in the early years, just reeks of the kind of
potential that will raise the hairs on the back
of even a seasoned investor. Mosquito’s par
excellence prize asset is its wholly-owned,
Idaho-based CUMO deposit that is thought
to be the world’s largest and still undeveloped
molybdenum deposit. The resource also has
positively astonishing concentrations of tung-
sten, silver, and rhenium that taken separately
would be exceptional mining plays.
I mentioned that Mosquito’s market capi-
talization is only $71 million—yet its molyb-
denum and other mineralizations are worth
billions, perhaps as much as $77 billion;
indeed, the stock is trading at its highs but
to rationalize its tiny market capitalization
and the huge value of the mineralization in
the ground is always a conundrum of sorts.
In cases like this, it’s good to make compari-
sons. In this case, Ivanhoe comes into view
once again. After an asset is discovered, it
needs to be assayed, then its size delineated,
and perhaps its sweet spots located (higher
concentrations of the mineralization). That
alone takes gobs of money, and then it takes
broadcasting to the mining and investor
42 Micro-Cap Review Magazine www.microcapreview.com
community, among other things. All of that
work is done in the quest of more money
and more money and then more money. The
good news is that when you really have it in
the ground and it’s big and rich, it isn’t quite
such a slog. But it’s still a process. As one gets
closer to production, the shares of the com-
pany generally trend higher. As part of the
process, add in investment banking relation-
ships, research reports, road shows bringing
professional miners and fund managers to
the asset, investor relations, etc. Along the
way management has to build with the
possibility that larger companies may want
to partner with it or buy the company out.
More processes always mean more money.
By the time a discovered asset becomes a
big mine in production, it can take billions
of dollars. And some of these mine sites are
gigantic; they are medium-sized towns often
out in the middle of nowhere or near the
Arctic Circle or deep in some jungle. The
good news with Mosquito’s CUMO deposit
is that it’s in a very easily accessible and very
friendly mining state called Idaho, where
mining is bread and butter. Mining infra-
structure, power, water, major roads, and rail
networks—and a trained workforce—are
available within 50 miles of the property.
Having already defined the huge size and
the richness of its ore body, Mosquito manage-
ment is well along in spreading the word. From
what I’ve heard, the biggest mining companies
in the world are now aware, and are becom-
ing more aware of the company’s scope and
value. Have I mentioned China yet? Oh yes!
Molybdenum is a necessity in making steel,
and China is the leading steel producer in the
world by a long shot. This story gets better and
better, don’t you think? China is desperate for
oil, iron ore, coal, aluminum, molybdenum,
etc. China is now the world’s leading producer
of automobiles, not to mention trucks and
cranes and big buildings and big dams. I’ve
been there and it’s mind-boggling. You may
know that China is searching out all of these
assets around the world and buying into com-
panies on a scale that is near unimaginable.
Almost every day we read stories about their
interest in these natural resources from places
you’ve never heard of. Having the world’s
largest and richest molybdenum deposits will
make all of the above-mentioned “processes”
much easier to undertake.
Molybdenum demand is expected to
increase between five and seven percent
annually over the next decade with demand
forecasted to outstrip supply for several years
to come. Global demand calls for additional
21 million pounds by 2011, rising to 85 mil-
lion pounds by 2015. In January, JPMorgan
analysts said they will see a likely rise of 55
percent in molybdenum prices in two years.
To quote the prestigious Northern Miner
regarding Mosquito’s CUMO asset:
“The project, 15 km southwest of Idaho
City, is undoubtedly large. The scoping study
considers the economics of the CUMO proj-
ect at four mining rates between 45,000
tonnes per day and 181,000 tonnes per day,
projecting initial capital costs in the range of
US$1.6 billion to US$3.4 billion.”
Based on a pre-tax financial model (earn-
ings before interest, tax, depreciation, and
amortization) and using a long-term, base-
metal price scenario, Ausenco’s ** study
showed the CUMO project having a net
present value (NPV) of US$16 billion for a
150,000 short tons per day ore production
rate and US$10 billion for a 100,000 short
tons per day ore production rate. These very
substantial figures indicate that Mosquito
should be developing CUMO toward an ini-
tial ore production rate of between 100,000
and 150,000 short tons per day. Importantly,
on November 23, 2009 Mosquito completed
the key public disclosure of information
relating to mineral properties in Canada
called Ni 43-101.
** The Ausenco Group (ASX: AAX)
[Market-cap AUD$564 million], headquar-
tered in Brisbane, Australia, is a leading
provider of engineering, project manage-
ment, and operation solutions for the global
resources and energy sectors and employs
around 2,200 people across 13 countries
around the world.
molybDenum Primer:
Molybdenum (Mo, atomic number 42) is
a refractory metallic element used princi-
pally as an alloying agent in steel, cast iron,
and superalloys to enhance hardenability,
strength, toughness, and wear and corro-
sion resistance. Ideal for tough environments
where heat, pressure, and corrosion are fac-
tors, molybdenum makes steel stronger and
lighter and makes stainless steel more resis-
tant to corrosion. Due to its low toxicity,
molybdenum is used as a catalyst in energy
production. It has a current price of about
US$12.50 a pound.
Also of note: on February 22, 2010 the
London Metal Exchange will launch trading
in molybdenum futures.
I strongly encourage readers to spend
some time on Mosquito’s Web site, which is
very comprehensive. The corporate presen-
tation, fact sheet, and the CUMO interac-
tive model are particularly informative and
engaging.
comPAny web sites:
Mosquito Consolidated Gold Mines
Limited: www.mosquitogold.com
Ivanhoe Mines: www.ivanhoe-mines.com
South Gobi Energy Resources: www.
southgobi.com
Please e-mail requests for my Best Ideas
for 2010 to [email protected].
About the Author
Dr. John Faessel is a Wall Street analyst who is widely
recognized for his insights into public companies and
financial markets. Dr. Faessel advises firms, brokers
and traders. His market evaluations cover global
currencies, credit markets, sector strength analysis,
technical analysis, sentiment overviews and both
long-side and short-side recommendations. For over
20 years, Dr. Faessel’s “On the Market” reports have
been widely distributed throughout the world to an
extensive list of financial institutions, investment
banking firms, mutual funds, hedge funds, brokers,
foundations and high net worth investors. n
www.microcapreview.com Micro-Cap Review Magazine 43
ProFIled CoMPanIes
Healthy Coffee International (Pink Sheets: HCEI)
cAtegory creAtor
The architect of the Healthy Coffee con-
cept, Rick Aguiluz wanted to create a prod-
uct that would provide health benefits to
people around the world. He wanted to
give people an opportunity to start their
home business for less than $500. And then
he wanted to teach them how to use the
Internet to build a global coffee distribu-
tion business. Sue Homemaker can earn
money by selling coffee to her friends and
neighbors through weekend coffee parties.
Joe Carpenter can earn commissions from
the Healthy Coffee business of his cousin
in Iowa, his sister-in-law in Japan, and his
brother in London.
heAlthy coffee usA
Healthy Coffee International sells products
exclusively through its subsidiary, Healthy
Coffee USA, Inc. (www.HealthyCoffee.com).
The company is well positioned in the mar-
ketplace at the junction of three mega-bil-
lion dollar industries: coffee, wellness bever-
ages, and energy drinks.
“hArDest working mAn
in mlm”
It all started in 1996 when Rick Aguiluz
was involved in his first network market-
ing company. Within 13 months he became
the top associate with over 25,000 distribu-
tors in his organization and was appointed
as the national sales director. Aguiluz was
responsible for opening a branch office in
the Philippines. He launched the office with
5,000 people at the Philippines International
Convention Center. This opening was the
biggest launch event in the company’s his-
tory, bigger than the launch events of the
United States, Mexico, and Canada com-
bined.
Aguiluz worked for two public compa-
nies as director of sales. While serving in
those roles, he helped open several offices
in two Asian countries. In 1999 Rick was
featured on the cover of an MLM magazine
as the “Hardest Working Man in Network
Marketing.” In 2003 he worked for a US
start-up of an Asian company as vice-pres-
ident of sales and marketing. He built the
44 Micro-Cap Review Magazine www.microcapreview.com
1,200 square foot operation with 800 dis-
tributors and $30,000 per month sales into
a 46,000 square foot operation with over
75,000 distributors and $30 million per year
sales in less than three years.
coffee is big business
In 2003 businesses sold 400 billion cups of
coffee worldwide, making coffee the world’s
most popular and widely distributed drink.
Coffee is the second biggest commodity in
the world next to oil.
AmericAns love coffee
Four out of five Americans drink coffee reg-
ularly. Over 50 percent of American adults
drink three to four cups of coffee daily. In
total, Americans consume over 400 million
cups of coffee each day.
why heAlthy coffee
Healthy Coffee sells a line of instant gour-
met coffee drinks that are not only deli-
cious, but also healthy. The products are
based on proprietary formulas that com-
bine the health benefits of ginseng, reishi
mushroom, and other top-quality ingre-
dients with the world’s finest coffee beans.
Ginseng helps boost energy levels, while rei-
shi helps improve circulation and strengthen
the immune system.
Ginseng is a highly touted herb that has
been in use for thousands of years. The
Chinese have used it for 5,000 years, and
North American herbalists since ancient
times. Ginseng is classified as an adaptogen,
because the active ingredient found in the
ginseng root helps normalize imbalances
within the body by increasing resistance to
the harmful effects of physical, chemical, and
biological stress. Respected researchers in
China, Japan, and Korea have done extensive
studies of ginseng and verified its effective-
ness in reducing fatigue and increasing stam-
ina. They have also found that ginseng plays
an important role in forming red blood cells,
eliminating anemia, and possibly reducing
cell damage, thus helping to counteract age-
related defects.
Reishi (or Ganoderma lucidum) is the
Japanese name for red mushroom, and is
also known as lingzhi in China. In Asia reishi
is known as the “Miraculous King of Herbs.”
Practitioners of traditional Chinese medicine
have used reishi as a herbal remedy for more
than 4,000 years. This amazing herb contains
over 200 important nutrients, including trit-
erpenoids, polysaccharides, and organic ger-
manium. Research has shown that reishi is
a powerful source of antioxidants that help
balance and strengthen the immune system
while helping to eliminate toxins.
ProDucts
EnerGi Blend: The only instant gourmet cof-
fee with ginseng and reishi, plus non-dairy
creamer and cane sugar.
EnerGi Black: The only instant gourmet
black coffee with ginseng and reishi.
EnerGi Chai: The only instant milk tea with
ginseng and reishi.
EnerGi Blast: The only instant energy drink
with ginseng and reishi.
future ProDucts
EnerGi Choco: The only instant chocolate
drink with ginseng and reishi.
Energi Mocha: The only instant mocha
coffee drink with ginseng and reishi.
globAlizAtion: now in 11
countries
Healthy Coffee has first mover advantage
by quickly establishing offices in 11 coun-
tries: Australia, Canada, China, Germany,
Japan, New Zealand, Philippines, Puerto
Rico, Samoa, Sweden, United Kingdom, and
distributors in 29 more countries. The com-
pany’s goal is to have offices in 100 countries
in 10 years.
billion DollAr comPAny in
10 yeArs
The company is working towards its plan
to build a network of 2.5 million indepen-
dent distributors in 100 countries (25,000
distributors per country). The plan is to
have customers order a minimum of $25
of products every month. That would make
Healthy Coffee a billion-dollar company in
10 years. n
Disclaimer: This corporate profile is based upon information provided by the issuer or company representative.
The information is not intended to be, and shall not constitute, an offer to sell or solicitation of any offer to buy
any securities. It is intended for information purposes only, and to increase awareness of the company profiled.
Safe Harbor Statement: The statements in this advertorial or profile relating to future products, partnerships,
technology, and positive direction are forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Some or all of the aspects anticipated by these forward looking statements may not,
in fact, occur. Factors that could cause or contribute to such differences include but are not limited to contractual
difficulties, demand for the Issuer’s common stock, and the company’s ability to obtain future financing. Micro-cap
Review Magazine may have received payment to publish and print this advertorial or corporate profile. Micro-cap
Review Magazine disclaimers apply and may be reviewed at www.microcapreview.com/disclaimer.php. Before
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with your professionals.
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46 Micro-Cap Review Magazine www.microcapreview.com
the other side of the story
Is gold useless?
I’m probably going to make a few people
very upset by writing about this topic, but
the short answer to the question is more YES
than NO. So before I start getting some hate
mail about why I think the yellow metal is
useless, let me clarify that it’s technically use-
less for the purpose that most investors are
using it for—protection against inflation.
Countless times people have asked me the
question, “Why don’t I invest in gold to protect
against inflation?” Moreover, there are vari-
ous newsletters that talk about how investors
are supposed to protect themselves from the
coming “hyperinflation by investing in GOLD
TODAY.” This question has, of course, become
much more popular, as many of us saw the yel-
low metal nearly quadruple in price over the
last decade. Well, in order for gold to protect
people against inflation, it technically needs
to be tied to the dollar in some way. Many
investors continue to pour billions of dollars
into gold via open ended funds, exchange-
traded funds (ETFs), money managers, and
even outright purchases of gold bars, think-
ing that the value of gold is tied to the paper
currency. Unfortunately, this assumption has
been incorrect for nearly 40 years.
For the last several centuries, all of the
major monetary systems were anchored by
gold. When countries traded with each other
using currency, they made sure that it was
backed by the yellow metal—hence the need
to continually mine more. In 1971 the Bretton
Woods system, or so-called “Gold Standard,”
broke down and was eliminated by the United
States government. The current backing of
each dollar that we hold or owe today is based
on the “Good Faith of the United States of
America.” In so many words, we have had
an extraordinary amount of currency being
printed without knowing whether or not we
have enough gold bars to make the paper
worth the denomination printed on it. Are
people still questioning why all of our coun-
try’s bondholders are getting worried? To scare
everyone even more, we also don’t know exact-
ly how much money is currently in circulation
since the Fed stopped reporting the broadest
measure of the entire money supply within
the economy in March of 2006—M3 (money
supply). The Fed still reports the M1 and M2
figures, but they are not as broad as M3.
With all of the new money being printed
at high speeds in Washington over the last
several months by our new administration, it
has brought the “how much” question to mind
more than a few times. A very wise old man
once told me “don’t go write a check you can’t
cash!” I think he was referring to something
else at the time, but somehow I get the feeling
that it can also be used here.
So, a few obvious questions come to mind
at this point.
• How or why is gold going to protect any-
one from inflation if it isn’t pegged against
the paper currency?
• What is the current gold to currency ratio?
• Why are all of these funds and fund man-
agers lying to people (again)?
• Why did gold go up so much if it’s not
pegged to the dollar?
• What kind of printer does the govern-
ment use? (pure curiosity)
I can’t answer all of these questions, but
will do my best with a couple of them.
I am not trying to alarm you or scare you
more than you may already be with everything
that’s going on in this world. The United States
of America has the best credit and economy in
the world. If we really put everything in per-
spective, our economy is larger than the next
four largest economies in the world...com-
bined! We do owe an extraordinary amount
of money (approximately $55 trillion and
counting), but that’s an issue for another day.
The point is that gold is a very limited metal
and cannot protect you against inflation. Only
about 1/8 (12%) of the world’s gold supply is
actually used by the end consumer (e.g. jew-
elry), with its largest customer being India. I’m
guessing that the only reason why gold became
so hot is because Wall Street needed something
to temporarily market and replace the “old
products,” because demand definitely wasn’t
going up by 400 percent. It’s a very similar
situation, if not the same reason why oil (black
gold) skyrocketed to nearly $150 per barrel last
summer. It was pure speculation.
Remember, Wall Street is the biggest and
best marketing firm in the world. It’s not
always a matter of profits and losses, but a
matter of consumer demand! So the next
question would be “why would anyone invest
in gold?” Having family in the jewelry busi-
ness and growing up with the day-to-day
teachings of the profession, I still can’t bring
myself to see a fundamental reason. But if
someone wanted to speculate that the pre-
cious metal will have more demand than
“projected supply,” then they have the only
reason you ever need to speculate into some-
thing. Gold jewelry is luxury first, investment
second (and people aren’t buying 100 ounces
of it to put around their neck). If you are
using gold as an investment, based on supply
and demand for something tangible, then
gold may find a small place in your portfolio.
The main purpose of this article is to educate
investors, so that they don’t get into gold
blindsided, thinking that President Barack
Obama is helping their investment by print-
ing more money. In my opinion, if investors
wanted to protect themselves against infla-
tion, they are better off buying a company
that is growing at a pace that’s at least double
the historical average inflation rate. The good
news is that they can buy that company at
a steep discount today. If you don’t like the
stock market, then you can still do very well in
the municipal bond market by buying some
tax-free bonds for a small discount. Either
way, bonds are simpler and are backed by the
solvency of an entity rather than dependence
on continued speculation.
About the Author
Yaron “Ron” Reuven is founder, president, and CEO of Reuven Enterprises, one of the top boutique financial services firms on Wall Street. The firm offers financial planning, investment advice, insur-ance and many other services to high and ultra high net-worth individuals, corporations, and pensions. Before founding Reuven Enterprises, Mr. Reuven worked at several leading financial services firms, including First Union and Raymond James. n
by ron reuVen
F I n a n C e
www.microcapreview.com Micro-Cap Review Magazine 47
R O G E R S O I L & G A S
The New Oil Boom is Upon Us
Experts believe that the Bakken field has more
oil reserves than all of Saudi Arabia. Now,
if that alone does not excite investors, then
they will be impressed by the potential oil
revenues estimated at $1 trillion. The Bakken
oil reserves are one of many discoveries that
will help rejuvenate oil exploration and devel-
opment in North America. According to Dr.
Paul Pelzin, an economist at the University
of Montana, what we are seeing is “a good,
old-fashioned oil boom.” Rogers Oil & Gas is
paving the way for shareholders and investors
to benefit from this boom.
Rogers Oil & Gas is an oil exploration
and production company that offers supe-
rior returns for growth-oriented investors.
Incorporated in Delaware and headquar-
tered in Phoenix, Arizona, the privately-
held company is the brainchild of John D.
Rogers, chairman and president, and Robert
H. Keenan, chief executive officer. Rogers’
background includes 35 years of experience
in the financial services industry. He has
served on the board of director of several
insurance companies. His experience in the
insurance industry has given him a unique
advantage to lead an oil exploration and pro-
duction company. Investing in commodi-
ties requires strong risk-management skills,
similar to those employed in the insurance
business. Rogers’ expertise in project financ-
ing has made his transition to the oil and gas
industry very successful. Keenan, a profes-
sional accountant since 1980, has consider-
able experience in tax planning and business
consulting for a long list of international
clients. In addition, he was a cofounder
of an oil and gas company with extensive
exploration and drilling activities. Together
ProFIled CoMPanIes
Investors will find on the Web site of Rogers Oil & Gas Corp. a very excit-
ing video about a recent US Geological Survey. The video tells about the
discovery of the Bakken oil field in North Dakota, one of the greatest oil
discoveries in US history.
48 Micro-Cap Review Magazine www.microcapreview.com
with other managers, Rogers and Keenan
have about 100 years of combined financial
experience. And on the technical side, the
company boasts of having the “best of the
best” in engineering and geological talent.
Within two years of operation, Rogers
Oil & Gas has already made major inroads
in its niche market. After having great suc-
cess in Canada during the first year, the
company has turned its focus to the United
States. Rogers and Keenan are very excited
to report that the entry into the US market
has been smooth. The move into the United
States will allow the company to profit from
a much bigger market “which is 10 times
greater than that of Canada’s and a wonder-
ful place to raise capital.” Having already
achieved positive cash flow in early 2010,
the company has a strong balance sheet with
impressive financial leverage.
Rogers Oil & Gas is committed to invest-
ing in “win-win” projects that benefit share-
holders. This commitment requires carefully
measuring risk while striving for steady and
aggressive growth. This risk-based approach
to investing is the key to the company’s suc-
cess. During the credit crunch, Rogers Oil
& Gas has provided vital capital to compa-
nies that are involved in low-cost oil and
gas development projects with high return
potential. Further, the company has limited
shareholders’ risk by following a simple for-
mula: invest in multiple wells and leave the
extracting to others - their partners who are
experts at operating wells. Rogers Oil & Gas
will generally invest between 5 to 50 percent
interest in a well (although the company
will invest from 50 to 100 percent interest
in the right situation). This allows the com-
pany to limit its exposure to any one project.
Currently, Rogers Oil & Gas holds from 14
to 50 percent interest in approximately 20
separate wells. The company is positioned
for “steady and aggressive growth over the
next 18-36 months” and plans to invest in at
least 16 new development wells and 4 new
exploratory wells within the next two years.
A vital part of Rogers Oil & Gas’ business is
focused on the extraordinary Bakken region.
This oil deposit spans 200,000 square miles
across North Dakota, Montana, and Canada.
The US Geological Survey estimates that
up to 4.3 billion barrels of oil are sitting
underground in the Bakken Formation. The
US Department of Energy reports that “this
could increase crude oil [production] in
America by billions of barrels.” According
to conservative estimates, the oil deposit is a
resource worth over $1 trillion. The Bakken
Formation has a tremendous amount of oil,
enough to completely satisfy 100 percent of
America’s need for oil for decades. To top it
off, the oil is a light 41 degree sweet crude oil,
which is considered by some to be the best
quality crude oil in the world.
The Bakken oil deposit was first discov-
ered in 1951 and is the biggest oil find in
US history. Back in the 1950s people had
high hopes that the discovery would bring
economic benefits to the area. But it soon
became clear that extracting oil from the
Bakken Formation was simply not cost-
effective. The technology was limited then,
and the crude oil had high water content. So,
the Bakken reserves just sat untouched, until
now. John Rogers explains that extract-
ing oil from the Bakken region is viable
today. Technological advances like horizon-
tal and computer-aided drilling, combined
with recent local government support, have
made oil drilling there an attractive invest-
ment. Currently, oil extraction costs have
plummeted to below $20/barrel, while these
same barrels sell for $75/barrel or more.
Also, each well can produce 100 to 120 bar-
rels per day on average, with some wells
initially flowing a staggering 3,000 barrels
per day. When these profit margins are com-
bined with ease of rig deployment, relatively
unencumbered pipeline accessibility, and a
large employment base in North Dakota,
Montana, and Saskatchewan, the company
has an opportunity to earn huge profits.
Rogers Oil & Gas has learned the fine art
of achieving rapid growth while minimizing
risks. The company knows where to find the
best oil extraction projects, how to invest in
these projects, and why it is investing in such
projects. John Rogers points to single-mind-
ed focus as a key competitive edge. “We
have replaced the words in our organization,
‘we might’, ‘we maybe’, ‘we could,’ with ‘we
will’ and ‘we are.’ And that is one of the big-
gest differences of our organization. We are
very focused on what we are doing. We are
very focused on our projects. We are very
focused on our partnerships. We are very
focused on our business model. We have not
varied or swayed in any way, shape or form
from what we have been doing. We know
what we are doing and we are doing it well.”
Clearly John Rogers and Rob Keenan are
steering the company in the right direction.
With its successful entry into the US market,
Rogers Oil & Gas is a company to watch. n
Disclaimer: This corporate profile is based upon information provided by the issuer or company representative. The
information is not intended to be, and shall not constitute, an offer to sell or solicitation of any offer to buy any securi-
ties. It is intended for information purposes only, and to increase awareness of the company profiled.
Safe Harbor Statement: The statements in this advertorial or profile relating to future products, partnerships, tech-
nology, and positive direction are forward looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Some or all of the aspects anticipated by these forward looking statements may not, in fact, occur.
Factors that could cause or contribute to such differences include but are not limited to contractual difficulties, demand
for the Issuer’s common stock, and the company’s ability to obtain future financing. Micro-cap Review Magazine
may have received payment to publish and print this advertorial or corporate profile. Micro-cap Review Magazine
disclaimers apply and may be reviewed at www.microcapreview.com/disclaimer.php. Before investing in any security,
you are strongly advised to review all public filings of the issuer of such security, which can be found at www.sec.gov,
as well as warnings published by the SEC at www.sec.gov/investors and to consult with your professionals.
No Boring Lawyers
OSWALD & YAPAward Winning Business Lawyers
Contact Lynne Bolduc16148 Sand Canyon AvenueIrvine, CA 92618
Telephone: (949) 788-8900Fax: (949) 788-8980E-mail:[email protected]
www.Oswald-Yap.com
50 Micro-Cap Review Magazine www.microcapreview.com
As we prepare this edition of Compliance
Corner, many of our readers across the
United States have weathered a brutal win-
ter. The start of 2010 has given us signs that
brighter days are ahead. Already we’ve seen
rays of sunshine peaking through the clouds.
We are adjusting not only to the change in
weather, but also to news coming out of
Washington, DC. It appears that business in
most sectors of the economy is improving.
fAir AnD AccurAte creDit
trAnsAction Act (fActA)
As reported in our last issue, the November
1, 2009 effective date has been postponed
to May 1, 2010. Many readers will consider
this good news. However, as in the past,
regulators expect greater compliance after
they have extended effective dates for rules;
i.e. there will be no excuse for not complying
with the new regulations.
finrA rulebook
consoliDAtion
The FINRA Office of General Counsel con-
tinues to consolidate the former NASD and
NYSE Regulation rulebooks. Several rule
notices are out for comment. Professionals
should review the FINRA Web site for rule
changes submitted to the SEC, as well as
those out for comment to FINRA. Firms
should not wait for someone else to make
a comment. Every firm should file its own
comments in the manner prescribed and
be part of the solution. All comments are
reviewed, and in many cases the comments
result in changes to rule submissions and
can result in total withdrawal of the rule
proposal. The FINRA Board, as well as the
SEC Commissioners and staff, want to hear
comments by member firms.
brokercheck web site
For many years FINRA has operated the
BrokerCheck Web site, which provides infor-
mation on brokers and firms currently reg-
istered and those that have been registered
within the last two years. Going forward,
BrokerCheck will carry information on all
registered brokers and firms on a perpetual
basis. The belief is that persons and firms
who have been disciplined or banned from
the industry will have that information con-
tinually available rather than disappear after
two years.
new rAte for fees PAiD
unDer section 31 of the
eXchAnge Act; effective
DAte: JAnuAry 15, 2010
The SEC has enacted its regular appro-
priation under Section 31 of the Securities
Exchange Act of 1934. Effective January 15,
2010, the Section 31 rule decreased the rate
applicable to specified securities transac-
tions on the exchanges and in the over-the-
counter markets from $25.70 per million
dollars to $12.70 per million dollars. This fee
rate will remain in place until further notice.
sec APProves chAnges to
the Personnel Assessment
AnD gross income
Assessment fees; effective
DAte: JAnuAry 1, 2010
The SEC has approved changes to FINRA’s
regulatory pricing structure as origi-
nally outlined in Regulatory Notice 09-56
(September 2009). Effective January 1, 2010,
FINRA revised the rate structures for the
personnel assessment and the gross income
assessment fees.
custoDy of investor funDs
or securities helD by
investment ADvisors
The SEC has amended its rules covering the
custody of investor funds or securities held
by investment advisors. Under the revised
rules, among other changes, the custodian
will have to verify that all withdrawals of
funds or securities were authorized by cli-
ents. The new rules also require annual
audits of client assets and a review of the
advisor’s internal controls to protect client
assets.
About the Author
Chet Hebert is founder and president of The
Compliance Department Inc., a compliance con-
sulting firm located in Centennial, Colorado. The
firm assists broker-dealers and investment advisors
in the areas of firm formation, compliance, CRD
service bureau, outsourced back-office processing,
and branch office audit services, including AML and
Reg S-P compliance. For more information about the
firm, please visit www.thecompliancedepartment.
com or call Chet at 303-339-9870. n
leGal • taX • aCCountInG
by Chet hebert
The Compliance Corner
www.microcapreview.com Micro-Cap Review Magazine 51
The staff is evaluated and the budget is implemented. There are meetings to discuss new
ideas for the coming year.
Overlooked are some important points. Compliance officers increasiningly play a crit-
ical role in today’s regulatory environment. Attendance at their meetings is mandatory.
Often glanced over with minimal discussion is suitability. This is my personal favorite.
I would suggest that each branch manager, broker, registered investment advisor (RIA),
and investment advisor representative (IAR) perform an annual evaluation. It is usually
the main issue of contention when client disputes result in arbitration.
Review your client’s financial statements, risk tolerance, marital status, retirement
plans, and potential and current objectives. Meet with your clients in person. Give them
a pen and paper. Have them put in writing their risk tolerance goals and current finan-
cial objectives. Read them together and discuss how these can be accomplished.
If you are an RIA or an IAR, you must meet the requirements of renewal of registra-
tion. It must be paid in full or you are subject to automatic termination by FINRA.
Advisors must submit all required documentation to each state in which they are regis-
tered. Form ADV, Part 1 annual amendment must be filed. The form is due no later than
90 days after the firm’s fiscal year end. For example, if the fiscal year ends on December
31, 2009, the form must be filed through the IARD system by March 30, 2010. The
annual amendment requires firms to update the assets under management, number of
accounts, and the number of clients. It is a good idea to review all pages to make certain
there are no omissions or errors.
There are a number of paths to take to be certain that you have done everything right.
Hiring a professional consultant that specializes in this service is always prudent. This
time of year is also a good time to review your options of coverage in the event you are
in need of such services. n
ombudsman
F I n a n C e
This is the
time of year
when investment
branch managers
are looking to set
goals for 2010.
They usually
try to figure out
how to increase
production
while reducing
overhead costs.
by JaCK leslIe
52 Micro-Cap Review Magazine www.microcapreview.com
SGS-COC-004752
www.microcapreview.com Micro-Cap Review Magazine 53
Forces driving this productivity improve-
ment and the growth conditions in Vietnam
will likely continue in the foreseeable future.
Despite these trends, investors should be
aware of the potential risks in Vietnam,
including difficulties posed by government
fiscal and monetary policies, which have
been blamed for the recent surge in inflation.
vietnAm towArD us cAPitAl
mArket entry
It has been a while since I was involved in
taking the first Vietnamese company public
in the United States. Working with a team
from Providential Capital, we effectuated a
reverse merger with a Pink Sheets company
and then upgraded it to the OTC Bulletin
Board. Today Cavico Corporation (NASDAQ:
CAVO) is the sole Vietnamese company listed
on NASDAQ. The capital markets in Vietnam
are not quite mature and stable enough.
Indeed, entry into the US capital markets is
a new concept for Vietnamese companies;
investment bankers that want to be pioneers
in this area must be prepared to put in the
vietnamOverview of
Vietnam stands out among the N-11 economies as having achieved the
highest economic growth rate in recent years. According to Goldman
Sachs, productivity increases have been an important source of Vietnam’s
economic growth, along with capital accumulation and labor gains.
by ben tran
54 Micro-Cap Review Magazine www.microcapreview.com
extra effort. Firms must be patient and be
willing to hold hands every step of the way to
make investment banking transactions from
Vietnam a success.
Today there are many boutique invest-
ment banks or M&A advisors initiating steps
to tap into the Vietnam market as they once
did with China a decade ago. Fortunately,
the Vietnamese government recently passed
a new circular to allow Vietnamese compa-
nies to list on U.S. stock exchanges; however,
the rule does not yet allow 100 percent equi-
ty listing for Vietnamese issuers. Thus, form-
ing a joint venture with a foreign company
is the only alternative for listing Vietnam-
based companies in the United States at the
moment.
Given current market conditions, listing
a Vietnamese company is not attractive if it
lacks a sexy story and sufficient net income.
Further, if China-based companies listed on
US stock exchanges today are facing difficul-
ties raising money in the United States, it
is likely that Vietnam-based companies will
have an even harder time. Further, having
so-called connections with local Vietnam rep-
resentatives might not be enough. There are
only a few Vietnam specialists with investment
banking experience in the United States and
who have actually done a cross-border trans-
action. Taking a Vietnamese company public
in the United States is a complex process that
requires integrated skills, global experience,
and local understanding. Like China, any
cross-border M&A negotiation from Vietnam
could be very lengthy. Investment bankers
who have cross-border experience might be
able to raise funds from a limited number of
Asia-focused global institutions. Compliance
with US GAAP audit requirements is perhaps
the biggest bottleneck in listing a Vietnamese
company. Many Vietnamese companies have
numerous subsidiaries, which make the audit
process a complicated ordeal.
Recently, IPOs have started to surface in
Vietnam due to an opening of government
policies to help stimulate the securities mar-
ket. Many Vietnamese companies that once
planned to enter the US capital markets are
now considering an IPO in Vietnam to cut
costs and save time. In fact, certain compa-
nies may have an easier time raising funds
with a local IPO. To maximize IPO services,
an effective M&A advisor must have working
relationships with global private equity firms
that are looking to make pre-IPO invest-
ments in Vietnam.
vietnAm outlook
Since the end of the Asian financial crisis in
2000, Vietnam has managed to restore fast
economic growth with the help of state-
owned enterprise reforms, fiscal incentives,
improvements in legal protections for busi-
nesses, the establishment of an equity mar-
ket, and the trade agreement signed with
the United States. Despite Vietnam’s rapid
economic success, this growth performance
is not unprecedented in Asia. During the
best growth periods, Vietnam outperformed
Indonesia, Malaysia, and India, but fell behind
China and more developed countries, such
as Singapore, Korea, and Taiwan. Goldman
Sachs expects Vietnam’s GDP to grow eight
percent per year through 2020. Goldman’s
forecast is good news. If Vietnam manages
to stay on this growth path, the government’s
target of doubling GDP from its year-2000
level by 2010 and again by 2020 is achievable.
Surprisingly Vietnam is not heavily affected
by the current global economic downturn due
to its strong domestic market. An increasing
number of emerging tycoons in Vietnam is
looking to invest in the local capital markets.
The local markets served as the playground
to create new “red” capitalists a few years ago.
Today, these Vietnamese high net worth indi-
viduals are looking to profit from local assets
by finding legal and fast track ways to invest
outside Vietnam via international oil and gas
projects, real estate investments, and perhaps
foreign publicly traded companies.
Vietnam is considered a new Asia tiger
with its GDP growth rate comparable to that
of China. Some institutions even regard
Vietnam as the next China. With a popula-
tion of 88 million people, two-thirds of
whom are under 30 years old, Vietnam has a
strong workforce to serve as the foundation
to support a fast growing economy. Vietnam
is compelling to investors who know how
to capitalize on the country’s advantages
of global natural resources, manufacturing,
and tourism where the country stands out
among peers. Vietnam is vibrant and on the
move! n
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